Trump floats plan to end taxes on tips, though experts raise doubts

[Omaha Steve]

Source: Nebraska Examiner

By: Ashley Murray - June 10, 2024 6:13 pm

WASHINGTON — Economists across the ideological spectrum raised doubts about the cost and workability of former President Donald Trump’s proposal over the weekend to exempt tips from federal taxes if he wins in November.

During a campaign rally Sunday in Las Vegas, where hundreds of thousands work in the hospitality industry, Trump promised service workers that they would no longer have to pay federal taxes on tipped income if the presumptive Republican nominee wins a second term.

The roughly 6 million tipped workers in the United States, as of the latest data available from 2018, make up a small fraction of the country’s 150 million taxpayers, but campaigning on tax cuts for certain demographics is increasingly a top issue leading up to November’s presidential election.

“This is the first time I’ve said this, and for those who work at hotels and people that get tips, you’re gonna be very happy because when I get to office we are going to not charge taxes on tips, on people making tips,” Trump said to cheers at the rally.



Read more: https://nebraskaexaminer.com/2024/06/10/trump-floats-plan-to-end-taxes-on-tips-though-experts-raise-doubts/

[mpcamb]

1. Worthy of note: trump never tipped ANYBODY in his life.

He still wouldn't exempt tip wages- he needs low earners to pay taxes for rich 1%ers.

[jimfields33]

12. I like this idea of not taxing tips.

It’s a headache and not worthwhile for the workers who live on tips. Tax the two bucks an hour, but not the tips. They’d get most of the two dollar an hour tax back as a refund.

[bucolic_frolic]

2. Insane and unworkable

[thesquanderer]

6. Not necessarily unworkable... compliance on paying tax on (cash) tips is already low.

The current issue is that so many people already do not pay tax on some or all of their tips. So the idea of making that no longer criminal (tax evasion) is not inherently insane or unworkable.

from https://www.forbes.com/sites/kellyphillipserb/2023/03/05/americans-are-tipping-more-and-more-often-the-irs-wants-its-cut/

Tips are subject to income and payroll (Social Security and Medicare) taxes. Employees are supposed to report all their tips to their employer, who can then withhold the proper tax and pay the employer’s share of payroll taxes. But compliance has always been low, particularly since so many tips have traditionally been paid in cash. In its Tax Gap studies, the IRS estimates that it gets 99% of what its due on regular wages, where taxes are withheld and reported to both the IRS and the taxpayer on a W-2, but just 55% of what it’s owed on tips (the same percentage it figures it collects from self-employed sole proprietors).
...
Over the last three decades, the IRS has launched a series of programs that encourage employers to voluntarily calculate, report and collect taxes on a certain level of tips in exchange for protection from tip audits for themselves and their tipped employees. Except that’s not working great either. A 2018 study by the Treasury Inspector General for Tax Administration estimated that 30% of employers with tip agreements in place were underreporting.

The recent move toward customers more often paying tips electronically (through an on-screen tap) should improve compliance, as it makes tips easily trackable. But it would be easy enough for the IRS to say that that income is not taxable.

I don't think this is inherently a bad idea. Rich people get all kinds of tax breaks. People who rely largely on tips don't, and they need it more.

[SunSeeker]

7. Why not just increase the minimum income at which workers will be taxed?

And strengthen the Earned Income Tax Credit for low-paid workers. That way it is fair to all lower income workers, not just those who work for tips. That is basically what Biden is trying to do with his tax plan. https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/11/fact-sheet-the-presidents-budget-cuts-taxes-for-working-families-and-makes-big-corporations-and-the-wealthy-pay-their-fair-share/

[thesquanderer]

9. I'm not saying it's the only (or best) way to help lower income workers...

...I was just saying the idea is not inherently "Insane and unworkable" (as it was called in the post I was replying to).

[EYESORE 9001]

3. I see new compensation packages for CEOs

All tips.

‘I was walking down the street, when these two guys approached and asked if I’d like to run their company - pro bono. I gave it a whirl and they seemed to like my work. They liked it so much, they gave me a tip. Fat stacks of cash. I came back the next day…’

[SunSeeker]

4. "No tax on tips" is his new "Build the Wall" promise to the rubes.

Even if he could pass such an unworkable and unfair law (unfair to all the taxed workers who don't work for tips), he will take away their ACA healthcare, abortion rights, education funding, Social Security, democracy and their freedom. Not much of a deal.

[Aussie105]

5. Most countries don't 'do' tipping.

But they do try to pay their workers a living wage.

Tipping is seen as a social faux pas in some countries, and as an insult in others.

[jimfields33]

14. We're getting better.

California is paying 20 bucks an hour for hospitality workers. Most areas are almost if not more to 15 bucks an hour. It helps that workers are refusing to go to places to work that don’t pay well. But I still don’t think tips should be taxed.

[twodogsbarking]

8. Here's a tip Donald; fuck off.

The entire tax code needs revised.

[lark]

10. He's totally lying and there's a major tell.

Anything he says that he's going to do for workers never ever happens, only the things hes doing for the rich actually becomes law.

If his mouth is moving, he's lying.

[Mr. Mustard 2023]

11. Taxing Tips Was Enacted by......

....wait for it - The Republicons.

[twodogsbarking]

20. * Unless you are a Supreme Court Justice.

[sakabatou]

13. Instead, watch him put a HIGHER tax on tips

[KS Toronado]

15. Tax breaks belong to the rich, not us little people.

[sinkingfeeling]

16. This makes national news, but Biden's proposal for eliminating medical debt from credit reports doesn't.

[IronLionZion]

17. Right, because taxes are the problem. Not wages or benefits

[kimbutgar]

18. Just like his health care plan this will never happen !

All he does is lie!

[LiberalFighter]

19. Will he claim his income are all tips?

[TexasBushwhacker]

21. Most tipped workers do not report their cash tips anyway

It ends up biting them in the ass when they're eligible for Social Security because their reported income is so low.

[Mark.b2]

22. Sounds like vote buying...nt