Vice President Kamala Harris call for the abolition of taxes on tips adds bipartisan support to his opponent, former President Donald Trump’s proposal. sailed two months ago. But the fate of the policy idea may depend on broader disagreements over basic pay, regardless of who wins the election.
Unlike Trump, Harris has proposed eliminating federal taxes on tip income with an increase in the national minimum wage, which has been in place since 2009 to $7.25 an hour.
However, many tip earners are paid a lower “subminimum” wage, which requires employers to pay the difference when it’s not added to the federal pay level. which is the US subminimum replaced a handful of states Hourly lows since 1991 are $2.13.
“It’s heartening that everyone is talking about this,” said Saru Jayaraman, president of the labor advocacy group One Fair Wage and director of the Center for Food Labor Research at the University of California, Berkeley. But “it doesn’t mean anything until we raise these workers’ wages and end the minimum wage for remote workers,” he said.
Without these changes, Jayaraman – who It ruined Trump’s plan In June, he said he would not support a stand-alone proposal on tax cuts – as a “false solution”. “The key issue for black voters, Latino voters and young voters is the cost of living and living wage jobs of this era,” he said.
It means nothing until we raise the wages of these workers and end the minimum wage for remote workers.
Saru Jayaraman, President of One Fair Wage
The criticism came amid concerns from fellow advocates about the proposal GOP lawmakers The bill, backed by the National Restaurant Association, would encourage business owners to tip their employees more to save on taxes. Harris said his campaign plan would include strict rules to prevent that.
The National Restaurant Association, which represents major food and beverage chains, did not directly comment on Harris’ proposal but reiterated its support for the proposal. No Tax under the Tips ActSen. Ted Cruz, R-Texas, introduced in July. A spokesman for the trade group called the bill “sensible legislation” for industrial workers that will “put more money in their pockets at a time when we feel our lives are being squeezed by high prices.”
Tax experts note shows that many tip earners earn too little to owe federal income taxes, and that the roughly 4 million workers in tipped industries far outnumber hourly workers subject to minimum wage laws. Some tax policy analysts also say tax-free tips are expensive and difficult to implement.
It comes as an increased focus on tip income consumers have become stingier dumperssurveys show that many tired customers are tired of asking baristas and servers to help them earn enough to make ends meet. The policy debate also coincides with a growing push to raise the minimum wage and eliminate the minimum wage.
While support for a higher base salary is more widespread among Democrats on Capitol Hill, some congressional republicansincluding Trump’s running mate, Sen. JD Vance of Ohio, who sponsored a minimum wage increase last year. But the policy required businesses to ensure that workers were authorized to work in the United States. Trump, in turn, voiced mixed positions on the minimum wage since entering politics. A spokesman for the campaign did not immediately respond to a request for comment.
At least 25 states and Washington, DC, they increased the minimum wage Over the past year, 20 have increased their inflated wages under legislation already passed. Recent months have seen increased activity in courts and polling stations.
The Michigan Supreme Court this month cleared the way for the state’s minimum to be repealed by early 2029. Jayaraman said One Fair Wage, which has led to such changes in many states, is optimistic about efforts in Massachusetts, which has a similar bill. voting in November. He also mentioned Chicago began to gradually eliminate the subminimum last month.
Tip earners have already benefited in some places that recently increased base pay.
Chicago servers and bartenders have earned at establishments using the Toast payment platform the average hourly base wage in the first quarter is $9.48 The software provider found that 2022 is up from $9 in the same period to 2024. In Washington, D.C., which last year passed a measure to raise the base wage to $10 an hour, servers and bartenders earned a median of $8 an hour in the first quarter, up from $5.05 in 2022.
One potential trade-off: After the change went into effect, the district’s average grades fell and only partially recovered, Toast found.
I don’t have this job because I want to. I have this job because I have to have it now.
Heather Clark, 37, bartender
Heather Clark, 37, who bartends on weekends at Sighs at Pete’s in Fort Wayne, Indiana, would welcome tax-free tips. But because he’s paid less for night shifts — $4.36 an hour versus $10 during the day — Harris’ call to combine tax breaks with wage increases sounds more compelling.
That combination “will make a huge difference,” said Clark, who also works full-time as a college enrollment coach. “I don’t have this job because I want it. I have this job because I have to do it now.”
Clark, an independent told NBC News in June Trump’s plan on tip taxes wasn’t enough to win his vote, he said this week, endorsing Harris.
The fine print of any such plan can be important to tippers. Cruz’s bill broadly refers to “tips,” while Harris singled out “service and hospitality workers” in his speech over the weekend.
“As soon as I heard about it, I started following it,” said Stephen Garrett, a barber in Montgomery, Alabama.
The 40-year-old married father of five left his barber shop in Tuskegee in 2022 due to high rent and equipment costs and took a full-time job at a social services nonprofit group for more financial stability. Garrett said he makes about $50,000 a year, but still brings in about $15,000 from his hairdressing — and would like to pocket more by submitting his tip earnings separately and being exempt.
“Sometimes I get more tips than I get through the services,” he said.
Any relief for tip earners would leave a hole in federal coffers if not replaced. Nonpartisan Committee for a Responsible Federal Budget He anticipates Harris’ proposal It will reduce state revenues from $100 billion to $200 billion over 10 years. His assessment Trump’s proposal projected a deficit of $150 billion to $250 billion over that period.