US Vice President Kamala Harris (left) and former President Donald Trump
Reuters
Vice President Kamala Harris has pledged to eliminate tip taxes in the service and hospitality industries if she wins the presidential election, repeating the same proposal put forward by former President Donald Trump several months ago.
Both candidates promised to end taxes on tips at separate rallies in Las Vegas, appealing directly to voters in Nevada, a key battleground state where the hospitality industry employs about a quarter of the state’s workforce, according to a June survey. Number of Employment.
“that “I promise all of you here that if I am president, I will continue to fight for working American families, including raising the minimum wage and eliminating tip taxes for service and hospitality workers,” Harris said at a rally in Las Vegas on Saturday that drew more than 12,000 people, her campaign said.
The proposal was announced a day after Nevada’s main labor union, the Culinary Arts Union, endorsed Harris, who said ahead of Saturday’s rally that her campaign plans to release a formal economic policy platform in the coming days.
Trump quickly took to social media to claim credit for the proposal, which he offered at his own rally in Las Vegas in June.
“[Harris] “She has no imagination, as evidenced by the fact that she pretended to say there’s no tax on tips!” Trump wrote. The truth of society I’ll post it Saturday evening.
Banning taxes on tips would require new legislation and Congressional approval, which a Harris campaign official later acknowledged.
A campaign official said Harris would work with lawmakers to craft a tax-free gratuity policy that would include income limits and requirements to prevent “hedge fund managers and lawyers from structuring their compensation in a way that exploits the policy.”
These warnings respond to some of the criticisms that have already emerged about banning taxes on tips.
Nonpartisan Committee for a Responsible Federal BudgetEliminating taxes on service tips would create a $150 billion to $250 billion hole in federal revenue over the next decade.
In addition to the hit to government revenue, some economists argue that the tip exemption does not effectively achieve its goal of reducing the tax burden on low-income Americans.
“The policy goal is to reduce the tax burden on low-income workers,” said Ernie Tedeschi, chair of the Yale University economics department. Budget Lab“This is not a targeted, efficient way to do it,” Trump told CNBC in June after the idea was initially proposed.
He noted that only a small fraction of low-income workers are in tipped jobs, and that many of those workers tend to be young or already don’t pay income tax because of their low income.
He also argued that the policy could create a hierarchy of low-income jobs, with only some workers benefiting from tax-free income, and that the tiered approach could encourage employers to try to game the system, such as by offering higher tips instead of higher wages.
“What kind of economy would you have that would incentivize tipping so much,” Tedeschi said. “I have to imagine that if some clever tax accountant or accountant thought about this for a minute, they would come up with some really clever ways to leverage tipping.”
