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Trump’s “No Tax On Tips” Puts Democrats in a Bind

Posted on Tuesday, July 23, 2024
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by Andrew Shirley
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42 Comments
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Former President Donald Trump’s plan to eliminate taxes on tips earned by service industry employees is a big hit with workers – and a big problem for Democrats.

During a campaign stop in Las Vegas last month, Trump pledged, “When I get to office, we are going to not charge taxes on tips, on people making tips.” Shortly thereafter, Senator Ted Cruz (R-TX) formally introduced S.4621, “A bill to amend the Internal Revenue Code of 1986 to eliminate the application of the income tax on cash tips through a deduction allowed to all individual taxpayers.”

In essence, the bill would do exactly what Trump promised, creating a tax deduction equal to the amount of tips a worker receives. Shortly after introduction of the bill, Nevada Senators Catherine Cortez-Masto and Jackie Rosen – both Democrats – quietly signed on as co-sponsors of the legislation, in doing so breaking with the White House and other Democrats who have proposed their own plan.

Even with bipartisan support, the bill stands little chance of passage through the Senate. However, it could become a major problem for endangered Democrats this campaign season – including the liberal party’s presidential ticket, now likely to be led by Vice President Kamala Harris.

While servers aren’t the only tipped workers, the restaurant industry is the second largest private-sector employer in America, employing roughly 15 million people. Notably, restaurants are also the number one employer of single mothers, Americans without college degrees, and the recently incarcerated. The tips generated by these positions are critical to the financial health of these often forgotten groups.

It’s no coincidence that Cortez-Masto and Rosen became the first Democrats to cross the aisle and sign on to Cruz’s bill, as the tip tax is a particularly potent issue in Nevada. By some estimates, as many as 25 percent of all workers in the Silver State are employed in industries that rely on some form of tips. According to the Associated Press, “Nevada has the highest concentration of tipped workers in the country, with about 25.8 waiters and waitresses per 1,000 jobs, followed by Hawaii and Florida.”

Trump’s proposal also highlights another unfulfilled promise from the Biden-Harris administration to working-class Americans. According to Reason Magazine, during the 2020 campaign, then-candidate Biden “pledged to end the so-called tipped wage credit—a practice that allows restaurant servers and others in the hospitality industry to be paid below the statutory minimum wage so long as their tips make up the difference.”

Four years later, however, Biden has failed to deliver on his promise – and Democrats are now simply recycling the same talking points to sell to voters one more time. Should Vice President Harris emerge as the Democrat nominee, she too will have to answer for this broken promise.

Moreover, real-world evidence suggests that, even if it were implemented, Biden’s proposal would be disastrous for tipped workers and the entire service industry in the long run. In cities like Washington, D.C., that have eliminated the tipped-wage credit, customers have seen service fees of 10 or even 20 percent tacked on to their bills, leading many to decide to simply avoid going out to eat altogether, undermining the ability of businesses to stay open at all.

In short, Trump’s proposal would cut the amount of money that the federal government collects and allow workers to keep it, while the Biden-Harris policy would protect the government’s cut and pass on added costs to businesses and consumers.

Trump’s plan would be a win-win for businesses and workers. While businesses could keep prices low for consumers by continuing to utilize the tipped-wage credit, workers would still get to keep more of their hard-earned tips.

Trump’s plan also undermines the liberal claim that Republicans only care about tax cuts for the wealthy – a favorite accusation employed by the left in response to Trump’s 2017 Tax Cuts and Jobs Act. While the data on that bill has proven that the vast majority of tax cuts in the legislation went to middle- and working-class Americans, Trump’s “no tax on tips” policy again makes undeniably clear that Republicans are fighting to put more money back in the pockets of working people.

With the liberal media spin machine unable to distort Trump’s proposal as some nefarious scheme to favor big business, elected Democrats like Cortez-Masto and Rosen had no choice but to begrudgingly break with Biden and Harris to support Cruz’s bill.

Nevada’s Culinary Workers Union Local 226, one of the biggest unions in the state, also flip-flopped on the legislation. They initially excoriated it, stating, “Nevada workers are smart enough to know the difference between real solutions and wild campaign promises from a convicted felon.” Yet, when both Democrat Nevada Senators added their names as co-sponsors, the same union lauded it without making any mention of the man who first proposed it.

Republicans have long made tax cuts a centerpiece of their economic agenda. Since Trump’s emergence onto the political scene eight years ago, however, his commitment to ensuring those tax cuts better target middle- and working-class Americans, just as his tip tax proposal does, has helped bring new voters into the party and put the GOP in a stronger electoral position moving forward.

Andrew Shirley is a veteran speechwriter and AMAC Newsline columnist. His commentary can be found on X at @AA_Shirley.

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anna hubert
anna hubert
2 months ago

Let the tips be and if there is a concern about not enough money being generated cut all the politicians pay by 15%

Michael McMenus
Michael McMenus
2 months ago

What about those of us that have near 100% of our income on a W2. What is the difference between a tip and a wage, especially when they justify a lower wage. Why do I have to pay taxes on 100% of my earnings and just because some one earns tips they don’t. If the server is working at Waffle House then they probably are paying much beside social security and medicare in taxes. However if the server is working at an upscale restaurant, they are probably making enough to pay income taxes. Why are tips different than any other hourly wage. Does he mean to exclude FISA taxes and income taxes or just income taxes? Why is this different that student loan forgiveness? Isn’t this just pandering to get votes?

Kimmie B
Kimmie B
2 months ago

I can’t wait to see the debate between Trump and kamela.

PaulE
PaulE
2 months ago

The subject of tax cuts, regulatory reduction and federal budget spending cuts to reduce the size and scope of our enormously over-bloated federal government should be best left to one of the AMAC authors with an actual background in economics or finance.

Chris Martin
Chris Martin
2 months ago

Tips is a form of pay. I am all for lower taxes, but there are servers and bartenders (let alone strippers) who make thousands a day in tips with $2.20/hr wages. Are we saying service workers are tax exempt? What about every other hard working American? This is a government handout to buy Nevada’s EVs.

NRiano
NRiano
2 months ago

As a long time server, I disagree with the no taxes on yips policy.
The reason is that this will necessarily significantly lower, in most cases the Social Security benefits when they retire.
Several decades ago a waitress I worked with was retiring. Many of the servers back then were not reporting their tips. So when that waitress retired, she bought a house in what was then the country… before she got her first Social Security check. She was shocked when she received her 1st check… it was under $200.
Her checks would have been much higher if they were reported, and thus taxed.
A lot of servers will be poor and have low income in their retirement years if they do not have a good monthly government check.

Jim
Jim
2 months ago

How can Trump justify eliminating income taxes on tips, because it is not fair to exclude some and tax the rest? He should fight to eliminate all income taxes and implement the Fair Tax, a national sales tax.

Jacko Cleamons
Jacko Cleamons
2 months ago

Might be good politics, but I don’t see how it’s different in principle than Biden vote buying giveaways other taxpayers have to pay more to make up for, eventually. This one just panders to a different group (rather than people with student debt, people who drive electric cars, etc. like Biden). If the new ‘worker’s GOP’ is this kind of stuff, I’m not impressed. The Democrats are still worse though.

John Gray
John Gray
2 months ago

Mitt Romney, for all his faults, made an important point about the 48% (or whatever it is now) that don’t pay income taxes. We want to increase the number of voters who could care less if we jack up the income taxes? We should be DECREASING that number of non-taxpayers. All of these supporting points aren’t about substance but just about winning votes. Of COURSE you can buy people off for votes. What do you think reparations are? Oh, we have a problem with suburban moms. Ok, how about Karan stimulous checks for white women in battleground states, sent in October?
If our tactics are to buy votes to win elections, please know this: The Dems will beat us like a rented mule at that game.

Kuate
Kuate
2 months ago

Best to do away with the IRS IRS, how much of our moneys is going to the IRS employees income, We heard George Bush JR saying that when he ran for election WHAT HAPPEN

Robert Zuccaro
Robert Zuccaro
2 months ago

Nevadas SEIU and service unions are lapdogs to the DNC all the way back to Harry Reid. The differences between Trump and Bidens dog, Kamala, couldn’t be more stark: one wants blue collar workers to keep whats theirs while the other thinks blue collars money is theirs to use to oay wealthy, Ivy League white boys liberal arts degrees off! The DNC only cares about the DNC not people! That’s why their candidates are “interchangeable”.

Stephen Russell
Stephen Russell
2 months ago

Victory Hooray when done

Forgotten Man
Forgotten Man
2 months ago

Imagine no tax on tips and the earners will be able to regularly invest part of that wonderful income into a ROTH for retirement! Vote TRUMP! We can deal with our money better than the big bloated government can! VOTE FOR TRUMP!

Shari
Shari
2 months ago

I’ve never been a waitress but one time I asked one what their salary was, and I about fell out of my chair. Fast forward we (my Husband and I) will usually tip ~ 15-20% My question, why didn’t someone think about this years ago?

RayinAK
RayinAK
2 months ago

Should also be no tax on social security as we were already taxed on come and paid social security tax.

Snake Pliskin
Snake Pliskin
2 months ago

President Trump has it half right. Servers in the restaurant industry I believe are not only taxed on their tips that can be traced Ie credit cards, but are also taxed on their sales. More people are using CCs to pay for their meals. Whether the server makes a tip or not, they are taxed on their total sales for that shift. Take away the tax on a server’s sales totals would be the way I would do it. If people are jealous of how much a Server makes, go try it. It’s not easy, but can be really fun. Sorry for the rant, but waiting tables paid for my college. Was I thinking of my SS check 40+ years later? No!

Jerry Harben
Jerry Harben
2 months ago

If almost half of the people who file returns get all their withheld taxes refunded, how many people actually pay taxes on tips anyway?

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