As the presidential campaign heats up ahead of the November election, Democratic candidate Kamala Harris and Republican candidate Donald Trump are both pushing policy proposals that will get them out the vote, striking a rare political chord this week when Harris voiced her support for a plan to eliminate tip taxes for restaurant workers and other tipped employees who make the federal tipped minimum wage of $2.13 an hour.
Trump was actually the first to float the idea of eliminating the tip tax. He voiced his support for the plan at a Virginia rally. Harris announced her own plan in mid-August, telling her supporters in Las Vegas, many of whom are members of the Culinary Workers Union: She also supports the idea.“If I’m president, I will continue to fight for working American families, including raising the minimum wage and eliminating the tip tax for service and hospitality workers,” Harris said.
But what does “no tax on tips” actually mean? And how would it affect restaurant workers? It’s unclear how the policy would work in practice, and neither Trump nor Harris have offered any specific proposals yet. Experts say there’s little economic benefitHere’s everything you need to know about how the “tax-free tip” system actually works.
What does “no tax on tips” actually mean?
This is one of those policy proposals that’s actually as simple as it sounds: Workers who are paid the tipped minimum wage of $2.13 per hour (also known as “below minimum wage”) wouldn’t have to pay federal income tax on the tips they receive from customers. While the majority of these workers are restaurant servers, bartenders, cocktail waitresses, and other service staff, the Department of Labor’s definition of a “tipped employee” applies to anyone who receives $30 or more per month in tips, and also applies to drivers and other workers who receive tips.
Who supports “no tax on tips”?
While Kamala Harris and Donald Trump have voiced support for the policy, it has been simmering among Republican lawmakers for at least a year. In June, Texas Sen. Ted Cruz Tip LawThe bill would completely exempt tips from federal income tax. Republican Rep. Byron Donald of Florida introduced a similar bill in the House of Representatives. Both bills have since been referred to committee. Congressional Democrats are skeptical. According to The Hill, Democratic lawmakers felt they were “blindsided” by the Harris campaign’s support for repealing the tip tax.He called the proposal “bullshit” and said Harris’ recent adoption of it was a “vote-grabbing ploy.”
And in some ways, it’s probably the latter. Strengthening Nevada’s votesIn the United States, the chefs’ union, with 60,000 members, wields great political power. The union has called for the abolition of the tip tax, I met Harris just days before she announced her support for the policy.Trump also They’re trying to increase the votes of union members in battleground states.Nevada is one of those states, trying to win the support of voters who generally favor lower taxes.
When announced, Cruz’s bill Enthusiastic support “Tipped employees are a critical part of the restaurant industry, and anything that strengthens their economic situation is a positive for them,” said Sean Kennedy, president of the National Restaurant Association, the industry’s largest lobbying group. It said in a statement “The Tip Tax Ban Act will provide immediate tax relief to more than 2.2 million restaurant workers and their families, putting more money in their pockets at a time when we are all feeling the squeeze from rising prices,” Cruz said in a post on his website.
“No tax on tips” sounds like a good thing. Why is it a bad thing?
That actually sounds like a good thing. And while it’s not necessarily a bad thing, it probably won’t have much of an impact on the vast majority of tipped workers. And it has a lot to do with the way the country’s tax system is structured. According to Vox.com: Only about a third of tipped workers earn enough to pay federal income tax.Income is “Standard deduction” For married couples filing jointly, the first $27,700 in income is tax-free. According to the Bureau of Labor Statistics, the average restaurant server makes about $32,000, and only about $4,300 of that income has to be paid federal income tax. (Notably, these workers also have to pay other taxes, such as federal Insurance Contributions Act tax and state income tax, if their income is high enough.) So it’s unlikely to have a significant impact on the financial burden on restaurant employees, especially those with the lowest incomes.
When Cruz’s bill was introduced, the Center for American Progress said,Little or no tax breaks would be offered to low- and moderate-wage earners.” He noted that the bill would allow high-income earners, like hedge fund managers, to reclassify large portions of their income as tax-exempt. Harris’ plan includes: “Guardrails” limit exemptions to low-income workersHowever, it remains unclear what the promised “strict requirements” are.
what Probably. Do you want to financially support restaurant workers?
The policy proposals that would most directly affect tipped minimum wage workers are: Eliminate completelyIn 2017, employers were required to pay workers at least the federal minimum wage of $7.25 an hour. Seven U.S. states: California, Washington, Alaska, etc. — Banning the tipped minimum wage; At least five companies are currently considering these policies.In states that have abolished the tipped minimum wage, Economic growth outside the food and beverage industry and declining poverty ratesHarris has expressed vague support for raising the minimum wage, but has not yet committed to eliminating the tipped minimum wage, at least since 2020. President Trump is against raising the minimum wage.
