WASHINGTON — At its core A one-on-one meeting with Senate Republicans Last week, former President Donald Trump joked that a new campaign pitch made it very popular among the caddies at the golf course near Mar-a-Lago: an end to taxes on money earned from tips.
This is an idea applauded in the senators’ chamber and Trump is likely to bounce back in a rematch with President Joe Biden this fall as he courts working-class voters in states with large service industries such as Nevada, Arizona and Georgia.
But it’s unclear whether the election-year talks will materialize as a serious policy plan on Capitol Hill. Several influential Republicans told NBC News they were skeptical of the idea, citing the growing national debt and questioning whether it would be fair to those who earn no tips.
Trump also talked about wanting to end the taxes in an earlier meeting with House Republicans, and Rep. Tim Burchett, R-Tenn., said Trump told lawmakers how a waiter had given him the idea.
“This thing really caught fire,” Trump ally Burchett said Monday, calling Trump’s proposal “smart policy.”
Three GOP senators who listened to Trump speak in a separate closed-door meeting noted that he talked about taxes and tips when they left last week. Sen. Ted Cruz, R-Texas, a onetime Trump opponent, said the idea was “awesome” and could change voters’ perceptions of the parties.
“There are a lot of people who started climbing the economic ladder relying on tips for someone who works as a waiter or waitress, or someone who works as a taxi driver, or a bellboy at a hotel,” he said. Cruz, who faces his own re-election battle in Texas this year. “The caricature of Republicans is that Republicans are the party of the rich and Democrats are the party of the poor and working class.”
Other Republicans are skeptical of the fledgling proposal.
“I don’t know how to make a unilateral decision about tips rather than focusing on employees in general,” state Rep. Chip Roy, R-Texas, an influential conservative, said in an interview. “So why would you favor those who make money over someone else who earns a similar salary? … It might even raise some legal questions about how you treat one person to another.”
“The idea of making sure hardworking families don’t get taxed? Good. Distinguishing between tips and advice, I’m not sure I quite get it,” Roy said.
Vice Chairman of the Ways and Means Committee on Taxation, R-Fla. Rep. Vern Buchanan also said he would not reclassify the way tips are taxed, citing the growing national debt.
“You just have to be careful with it. We are running this trillion dollar deficit. You have to be careful with all of this,” Buchanan said. “I want to be sensitive because they work so hard. And certainly a big part of their earnings are tips. All these programs sound good; everybody likes to pay less tax. But we have to pay the bills.”
According to the IRS, all cash and non-cash tips subject to federal income taxes. That means Congress needs to step in and pass legislation to make tips tax-free in the future. Main parts Trump tax cuts expires at the end of 2025, and if he’s elected, Trump’s idea of tips could be on the menu for politicians looking to rewrite the tax code.
Such a move will have a serious impact on the debt.
The Committee for a Responsible Federal Budget, a research group that advocates cutting red ink, estimated in a paper Sunday that it could be exempt from income and payroll taxes. It reduced federal revenues by up to $250 billion over 10 years.
Asked if the campaign had policy details or cost estimates, Trump spokeswoman Carolyn Leavitt said in an email: “President Trump intends to ask Congress to repeal the taxes on recommendations to put more money in the pockets of hardworking service workers. By contrast, Joe Biden aggressively beefed up the IRS in pursuit of advisory staff. (The White House says additional IRS funds provided by Biden Improving customer service and targeting wealthy tax avoiders rather than low or middle income earners.)
Lael Brainard, a senior White House adviser to Biden, responded cautiously when asked by West Wing officials about the idea of tipping off Trump, citing Hatch Act bans on political activity.
Overall, Brainard said in a call with reporters last week that Biden is “fighting for real solutions that actually address workers’ legitimate needs for fair wages” and that he has better ideas, including a higher minimum wage and overtime protections for Nevada wage earners. .
“So, in our view, the meaningful policy changes that would really improve the living standards of Nevada workers and workers across the country would be to raise the minimum wage and eliminate the minimum wage, which would generate $6,000 more in income per year,” he said.
A day after visiting Capitol Hill to celebrate his 78th birthday with supporters at the West Palm Beach Convention Center in Florida, Trump elaborated on the story of the advisory proposal. He was at a restaurant in Las Vegas and asked a waiter what he had to do to win his vote. He told him to eliminate taxes on tips, Trump said. To spread the word, he had his supporters write on restaurant receipts: “Vote for Trump because there is no tax on tips.”
Rep. Marjorie Taylor Greene, R-Ga., a Trump loyalist, did just that, tweeting a photo of a receipt with the caption, “VOTE TRUMP! No tax on tips!”
Rep. Byron Donalds, R-Fla., another Trump ally, also welcomed the idea.
“Listen, as a former waitress — I waited tables in college and a little bit after college — I think we should definitely do this,” Donalds said. “Waiters, waiters, service staff – they work hard every day. They work hard and are not millionaires. It makes no sense for me to go after them.”
Senator Kevin Cramer, who recounted the story of Trump’s friends, also sees the tips offer as a way to attract voters: “Trump and Republicans are fine with tips. “Working-class voters haven’t been this Republican since Reagan,” Cramer said in a brief interview Monday.
Burchett said despite the red ink the policy may create, the economic impact will be positive.
“I believe these people are not going to stuff it in a mattress or bury it in a Mason jar in your backyard. They will quickly return it to the economy,” he said. “I’d rather have Americans invest in it than have the federal government steal it.”