The Proposal: A Quick Breakdown
In an effort to alleviate financial stress on service industry employees, Trump announced his support for a tax exemption on tips during a campaign rally in Las Vegas. He targeted hospitality workers—think waitstaff, bartenders, and hotel employees—who often depend on tips as a significant part of their earnings. This initiative, endorsed by Biden, would affect roughly 6 million tipped workers in the U.S., a small fraction of the country’s 150 million taxpayers.
But hold your applause. The IRS collected about $7 trillion in overall taxes in 2018, with tipped workers contributing approximately $38 billion. That’s a sliver of the pie, but still, changing the tax code requires congressional approval—never a simple task.
Economic Scrutiny
Economists across the board have expressed skepticism. Janet Holtzblatt from the Tax Policy Center criticized the plan for giving tipped workers a tax advantage over others. She argues that a better solution might be raising the minimum wage for service workers.
Potential Revenue Loss
Andrew Lautz from the Bipartisan Policy Center also raised eyebrows at the policy’s feasibility. With an estimated cost of $4.6 trillion over the next decade, extending all tax cuts from Trump’s administration would hit the nation’s coffers hard.
Political Reactions
On Biden’s end, Vice President Kamala Harris has championed the proposal, showcasing a rare moment of unity between the current and former administrations. Biden’s camp has emphasized broader policies, like increasing the minimum wage and eliminating the tipped minimum wage, to address economic disparities.
What’s Next?
The proposal sounds good in a campaign speech, but let’s not kid ourselves—it’s a legislative mountain to climb. Trump promised swift action, but changing federal tax laws is Congress’s job, and historical data suggests tipped workers might not see significant benefits. Only high-end waitstaff and certain hotel employees stand to gain big, while many continue earning so little that a tax exemption wouldn’t change their financial landscape.
Ted Pappageorge from the Culinary Workers Union Local 226 remains skeptical, calling for substantial solutions rather than empty promises.
Final Thoughts
So there you have it. A proposal glimmering with promise but riddled with practical challenges and economic doubts. It’s like seeing Bigfoot in the political wild—a rare phenomenon but questionable in its believability. Whether this tax plan can navigate the legislative labyrinth and go on to deliver tangible benefits for tipped workers remains to be seen. Until then, both sides can claim a rhetorical victory in bipartisan cooperation, however fleeting it may be.
Sources
No tax on tips: Why politicians love it, and economists don’t
Trump floats plan to end taxes on tips, though experts raise doubts
Untipped: Why Trump’s Tax Cut Promise Would Hurt Many Service Workers
Here’s how the tax policies proposed by Biden and Trump differ
More From Around The Web
Videos:
TAX-FREE TIPS?
BREAKING DOWN TRUMP’S NEW TAX PROPOSAL FOR TIPS
NO TAXES ON TIPS? COULD TIPS BE TAX-FREE SOON?
HOW TO OFFSET LONG-TERM CAPITAL GAINS? – COUNTYOFFICE.ORG
TAXATION IS THEFT: HOW TO STOP GETTING ROBBED (LEGALLY)
Tweets:
Eliminating federal taxes on gratuities would “significantly reduce #tax liability” for 6mn workers who earn tips — including restaurant servers, baristas, taxi drivers, bartenders and hair stylists, according to @andrew_lautz.
Read more via @TaylorNRogers of @FT. 👇 https://t.co/Vg172aDx38
— Bipartisan Policy Center (@BPC_Bipartisan) July 23, 2024
