Donald Trump floats getting rid of taxes on tips for service workers in Nevada.

 

Donald Trump at the rally in Nevada. CBS News.

Donald Trump floats getting rid of taxes on tips for service workers at a rally in Las Vegas Nevada. CBS News. Trump said it would be one of the first things he would do when he got into office. It's the first time that Trump has floated the idea and would help service workers who are paid below minimum wage because they make up for it in tips. The IRS taxes tips as regular income. The proposal would have to be taken up by congress, which could be taken up in 2025, when the Trump led tax cuts are set to expire. The pitch was a calculated one in Nevada, which has huge population of service workers who have suffered since the pandemic. Trump currently leads Biden in Nevada, which has been a blue state since 2004.

My Comment:

The elephant in the room is that this income used to be de facto tax free. In the past when everyone paid in cash, service workers could pocket these tips and not report them as income. Indeed, some people still tip like this specifically so service workers can do this. However, with the change from cash to credit and debit cards and other non-cash methods of payment, this has stopped as those tips are reported to the IRS. That means that the effective tax rate for service workers has gone up dramatically.

Of course there is an argument that service workers should have always reported this income and the new method of tipping is a way to make up for the fact that these folks weren't paying their fair share in taxes. There is some merit for these claims, the cash tipping loophole is one that probably should have been fixed. And there are some workers that get cash tips regardless, with hotel workers in Vegas being a pretty obvious example. 

Regardless of the morality of not paying taxes on tips under the old system, this is a very smart pitch by the Trump campaign. Doing so would help service workers keep more of the money they earn while working and likely earn Trump a lot of votes. There are a huge number of people from the service industry that would love to see their tax rate going down. 

Can Trump pull it off? I don't know. I'm not sure how the GOP congress critters would react to this. I am guessing the fiscal responsibility wing of the party would be mad about the loss of tax revenue. I'd argue that having these people having more of their tax dollars to spend would help the economy enough that it could make up for it, but who knows if that would be a persuasive argument for them. And the Republican Party are experts at shooting themselves in the foot and might be willing to give up on millions of service workers on principal alone. 

I do think that this will probably play well in Nevada and Las Vegas specifically. Nevada is more reliant on tourism and service industries than most states and they would greatly apricate the tax break. The state is trending red regardless and I think there is a very good chance that it's a GOP pick up in 2024, even without this announcement. 

I am sure that Democrats will claim that Trump is attempting to buy votes and it's not totally insane. But I will say that it's a lot less cynical than what Biden did with his student loan forgiveness. At least these folks earn the money they get from tips, unlike the people who got their debt canceled. And it will be helping people in the lower and working classes, not the upper class folks with fancy college degrees.