Both Trump and Harris want to eliminate taxes on tips. This is how it could affect workers
CNN
With the presidential campaign heating up, both former President Donald Trump and Vice President Kamala Harris are making a play for service and hospitality workers’ votes by promising to eliminate taxes on tips.
With the presidential campaign heating up, both former President Donald Trump and Vice President Kamala Harris are making a play for service and hospitality workers’ votes by promising to eliminate taxes on tips. But the move likely wouldn’t help many tipped workers, largely because a sizable share don’t earn enough to pay federal income taxes, experts say. Neither Trump, who announced the idea at a Las Vegas rally in June, nor Harris, who voiced her support for the policy in Las Vegas on Saturday, have released detailed proposals, which would have to go through Congress. Among the questions are how much tipped income would be free of taxes, whether any guardrails would be put in place to prevent fraud and abuse and whether both federal income and payroll taxes would be eliminated. Harris would couple her plan to eliminate taxes on tips with a push for Congress to raise the minimum wage, a Harris campaign official said. Also, the proposal would include an income limit and prevent hedge fund managers and lawyers from structuring their compensation to try to take advantage of the policy. Tips would remain subject to payroll taxes. Soon after Trump promised to get rid of taxes on tips, Republican Sen. Ted Cruz of Texas introduced a bill titled “No Tax on Tips Act,” which would allow workers to deduct tips paid by cash, check, credit card and debit card on their federal income taxes. However, it would not eliminate federal payroll taxes, which fund Social Security and Medicare and total 15.3%, half of which is paid by employers. The legislation is supported by Democratic Sens. Jacky Rosen and Catherine Cortez Masto of Nevada, a key swing state where many residents work in the hospitality industry.
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