A proposed bill to eliminate federal taxes on tipped income has generated both excitement and skepticism. While service workers like Chris Lopez initially welcomed the idea, concerns have emerged about its potential impact on the federal budget and the long-term benefits for individuals.
On a good night, Chris Lopez, a bartender and server in Southern California for eight years, can make $200 to $400 in tips. So when the 31-year-old, who lives in Orange, first heard the news about President-elect Donald Trump’s campaign promise of “no tax on tips,” he got excited. “That’s a great idea,” he thought to himself. But when he found out more about the proposal, he wondered if he would benefit at all.
In June, Trump told rally goers in Las Vegas — a city with the highest proportion of restaurant, hotel and casino workers in the country — that, if elected, he would eliminate federal taxes on tipped income. Initially, the news was met with excitement by Lopez and several in the service industry where tips can make a good portion of take-home pay. Democratic opponent Vice President Kamala Harris followed up with a similar no-tax-on-tips promise — also at a rally in Nevada, a critical swing state. In Congress, the no-tax-on-tips idea gained political steam on both sides of the political aisle with bills introduced in the House and the Senate. Sen. Ted Cruz (R-Texas) was the first to introduce the No Tax on Tips Act in July with support of Democratic Sens. Catherine Cortez Masto and Jacky Rosen, of Nevada. The legislation exempts tipped wages from federal income tax, but not payroll taxes, which fund Medicare and Social Security. Around the same time, Rep. Thomas Massie (R-Ky.) introduced a House bill that excludes tips not only from federal income tax but payroll taxes as well. Economists and tax experts have criticized the bills. The Tax Foundation estimates that untaxed tip income could add $107 billion over the next decade to the federal defici
TIPS TAXATION FEDERAL BUDGET SERVICE INDUSTRY ECONOMY
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