GOP Tax Plan: Big Changes for Families and Tipped Workers

The GOP’s new tax plan introduces MAGA Saving Accounts with tax-advantaged accounts offering $1,000 per child to promote long-term investment and growth. The proposal is also made to benefit the working families. Furthermore, this proposal is part of the Republican agenda, including tax-free tips, expanded child tax credit, and a high SALT cap. Let’s find out how MAGA accounts reshape family savings.

Trump’s Tax Legacy: Making the 2017 Cuts Permanent

As part of the newly unveiled GOP tax plan in May 2025, House Republicans propose making the 2017 Tax Cut and Jobs Act (TCJA) permanent. It is originally set to expire at the end of 2025, but provisions like families and individuals are willing to continue indefinitely if the bill passes. The key extensions are:

Lower individual income tax rates are temporarily under the original TCJA.
An increased standard deduction, nearly doubling the pre-2017 amount. It is aimed at simplifying taxes for millions.
Expanded Child Tax Credit, raised to $2,500 through 2028 before reverting to $2,000.

President Donald Trump called the plan “GREAT” on Truth Social, emphasizing it as a signature achievement of his second term. Making the cut permanent is central to the GOP’s economic platform, framing it as important for middle-class relief and economic growth. However, Democrats argue the extension favors the wealthy and adds to the national deficit. They also added that the debt ceiling will increase by $4 trillion to prevent a fiscal crisis.

Boosting the Child Tax Credit Through 2028

The GOP’s 2025 tax proposal seeks to increase the Child Tax Credit (CTC) to $2,500 per child through 2028 before reducing it to $2,000 annually afterward. Such a move is intended to extend financial relief for families as the current $2,000 credit is set to drop to $1,000 at the end of the year if no action is taken.

Unlike some Democratic proposals that push for a fully refundable credit, the Republican plan keeps the credit partially refundable. This indicates that many low-income families may not receive the full amount. Still, the increase is positioned as a win for middle-income households struggling with rising costs of living, housing, and childcare.

Tax-Free Tips and Overtime Pay

The GOP’s 2025 tax plan includes a temporary federal tax deduction for tips and overtime pay through 2028. This step is marking a significant shift in how service and hourly workers can be taxed. Thus, such provision would allow millions of workers – especially in industries like hospitality, food services, and retail to keep more of their earnings.

According to the Bureau of Labor Statistics, more than 4.5 million Americans rely on tips as part of their income. Next, the tipped workers typically earn a base wage of just $2.13/hour federally, making tips very important for them. Additionally, hourly employees working overtime in sectors like healthcare, logistics, and manufacturing stand to benefit from this deduction.

MAGA Savings Accounts: $1,000 Per Child for Investment

The new GOP tax proposal includes the introduction of MAGA Savings Accounts, providing $1,000 for each child to encourage long-term savings and investments. The key points of such provision are:

Purpose of MAGA Accounts: The accounts are designed to help parents save for their children’s future, providing a starting point for investment growth, whether for education, housing, or retirement.
$1,000 Initial Deposit: Each child will receive a $1,000 deposit into a MAGA account, which will be invested in growth-oriented assets. Thus, this provision aims to provide financial security and a head start for children from birth.
Long-Term Investment Focus: The funds in MAGA accounts are intended for long-term growth. It allows parents to invest in stocks, bonds, or other assets that could grow over time, benefiting the child as they grow older.
Tax-Advantaged: Similar to other saving plans, MAGA accounts are created to offer tax benefits, allowing the investment to grow without being taxed annually.
Support for Future Generations: Proponents argue that MAGA accounts will help reduce the wealth gap by giving the children a financial foundation. It is provided mainly to children from lower and middle-income families who might not have access to such opportunities.
Political Significance: The initiative linked to the MAGA brand is seen as part of the broader Republican agenda to support conservative financial policies. It aims to encourage personal responsibility and savings.
Temporary vs. Permanent: Like many provisions in the tax bills, MAGA accounts are set to be available through 2028, with the future of such savings accounts dependent on the bill’s success in Congress.

SALT Cap Raised to $30,000 — But Not Without GOP Pushback

The GOP’s 2025 tax proposal includes a provision to raise the cap on state and local tax (SALT) deductions from $10,000 to $30,000. However, the change has already generated controversy, especially within the Republican Party. Here are some points to know:

SALT Cap Background: The $10,000 SALT cap was introduced under the 2017 Tax Cuts and Jobs Act. It disproportionately affected taxpayers in high-tax states like California, New York, and New Jersey, many of whom are upper-middle-class earners.
Proposed Increase: The new plan would triple the SALt deduction cap to $30,000, aiming to limit the benefit for the wealthiest households while offering relief to high-earning professionals.
Intra-GOP Conflict: While Republicans from high-tax, blue-leaning states support the increase, fiscal conservatives oppose it. Thus arguing it primarily benefits wealthy households and undermines the goals of a flatter, simpler tax code.
Taxpayer Impact: According to the Tax Foundation, removing or raising the SALT cap would benefit the top 20% of earners, especially those in metro areas with high property taxes.
Budget Implications: Raising the SALT cap is projected to cost the federal government billions in lost revenue, increasing the deficit. Therefore, it is a striking point for fiscal hawks within the party.
Legislative Risk: Several GOP lawmakers have already signaled they won’t support the bill unless the SALT cap is either removed entirely or adjusted, threatening the proposal’s path through the House.
Regional Tensions: The SALT debate has highlighted deep divides between coastal and heartland Republicans, complicating consensus on what should be a unified party bill.

Conclusion

The GOP’s 2025 tax plan introduces sweeping changes aimed at supporting families, workers, and future generations. From MAGA savings accounts to tax-free tips and a higher SALT cap, the bill reflects core Republican priorities. However, internal conflicts and fiscal concerns may shape its outcome in Congress.