Former President Donald Trump proposed to exempt tips from federal taxes if he wins in November, a move that has economists raising doubts about the cost and workability of this proposal. During a rally in Las Vegas, Trump promised service workers that they would no longer have to pay federal taxes on tipped income if he wins a second term. The proposal would impact roughly 6 million tipped workers in the U.S., who paid about $38 billion in taxes on tips in 2018.
Economists have pointed out that the impact of this tax cut would be relatively small and that Congress will face challenges in prioritizing trade-offs across different policies. Trump’s proposal has been criticized as more of a campaign promise than a well-thought-out tax policy. Critics also suggest that the proposal could incentivize tipped work and lead to potential misuse.
While some support relief for tip earners, others argue that raising the minimum wage for service workers would be a more effective solution. President Joe Biden’s campaign responded to Trump’s proposal by stating that Biden supports increasing the minimum wage and eliminating the tipped minimum wage, which they believe is a more significant issue.
The Culinary Workers Union Local 226 in Nevada, which represents 60,000 members, has expressed skepticism about Trump’s proposal, calling it a “wild campaign promise.” They emphasize the need for real solutions rather than empty promises from politicians. Overall, economists and worker advocates are questioning the feasibility and impact of Trump’s proposal on tipped workers and the economy.
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