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.
