Both presidential nominees support no tax on tips. But this now-popular campaign issue is making tax experts and economists shake their heads.
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No taxes on tips. Both presidential nominees support the idea, Vice President Kamala Harris and former President Donald Trump. But this now-popular campaign issue is making tax experts and economists shake their heads. NPR’s Luke Garrett reports.
LUKE GARRETT, BYLINE: Carlos Williams works as a server at IHOP in La Plata, Md., where he earns 3.20 an hour plus tips. Williams says no taxes on tips would be a game changer.
CARLOS WILLIAMS: Say I get $200, right? Thirty of those dollars are going to taxes that I need – you know what I mean? – whether it’s for toilet paper, packs of cigarettes – you know what I mean? – or for just saving.
GARRETT: This idea caught political fire in recent weeks. Former President Trump brought it to the national stage during last month’s Republican National Convention. He said he came up with the idea after our conversation with a Las Vegas server.
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DONALD TRUMP: But I said to her, let me just ask you a question. Would you be happy if you had no tax on tips? She said, what a great idea.
GARRETT: And this past weekend, Harris also voiced support for tax-free tips at a campaign rally in Las Vegas.
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VICE PRESIDENT KAMALA HARRIS: When I am president, we will continue our fight for working families of America…
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HARRIS: …Including to raise the minimum wage…
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HARRIS: …And eliminate taxes on tips for service and hospitality workers.
GARRETT: The plan is now making its way through Congress, where it has bipartisan support. More importantly, it’s also backed by the powerful Culinary Workers Union. But tax experts are more skeptical.
STEVE ROSENTHAL: We’re in a campaign season – silly season. And not so much a united front, but a race to the bottom would be a better way to describe tax policy here.
GARRETT: That’s Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center. He says not taxing tips would create a system where everybody would want to earn tips rather than wages. He estimates it would cost the federal government around $100 billion over 10 years.
ROSENTHAL: That’s a big number for Congress to swallow.
GARRETT: Garrett Watson, senior policy analyst at the Tax Foundation, largely agrees with Rosenthal. He says the campaigns need to release more details.
GARRETT WATSON: So a lot of tax ideas that come up have had years or decades of ideas behind them. Here, not so much.
GARRETT: IHOP server Carlos Williams agrees.
WILLIAMS: I would like to learn more about the details of how that may work because there has to be a give and take.
GARRETT: But he says it would be beneficial for service workers everywhere. Luke Garrett, NPR News, Washington.
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