Trump Submits a Bill Not to Tax Tips, Overtime Pay, and Social Security

Summary

President Trump has submitted a bill to eliminate federal taxes on tips, overtime pay, and social security benefits, positioning it as a major relief package.Zhitong This legislative push follows recent data showing U.S. Q4 2025 GDP slowed to 1.4%, significantly missing expectations.Sina Finance

Impact Analysis

Don’t look at this as just tax reform—it’s a direct reaction to the macro slowdown. We just saw Q4 GDP hit 1.4% (missing the 2.5% consensus), so Trump is firing the populist stimulus cannon to juice consumption.Zhitong+ 2

Two clear trades here. First, this is a massive tailwind for Consumer Discretionary (XLY) and the Service/Hospitality sector. If service workers and seniors suddenly keep 15-20% more of their income, that liquidity flows immediately back into the real economy.

Second, watch the bond vigilantes. This is effectively an unfunded fiscal expansion. The deficit is already under pressure, and cutting these revenue streams without clear offsets means more Treasury issuance. I’d be looking to short the long end of the curve (TLT) or put on a steepener trade. The equity market might cheer the stimulus, but the bond market is going to price in the inflation and debt risk.