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No taxes on tips? Even bartenders reject Trump’s plan | Editorial team
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No taxes on tips? Even bartenders reject Trump’s plan | Editorial team

If Donald Trump’s proposal to eliminate the tip tax is such a boon to the working class, ask yourself: Why do so many of the would-be beneficiaries say they don’t want it?

This is “not only the wrong solution, but a false solution,” said Saru Jayaraman, president of the workers’ rights group One Fair Wage.

It was “misguided,” said Elyanna Calle, a bartender and organizer with Restaurant Workers United, a union that opposes Trump’s plan.

The most blunt comment came from the treasurer of the Culinary Workers Union, which represents 60,000 workers in Nevada, where Trump announced his proposal for tax-free tips.

“Tip earners definitely need help,” says Ted Pappageorge, who has worked as a busboy and bartender, “but Nevada workers are smart enough to distinguish between real solutions and wild campaign promises from a convicted felon.”

Ouch. So why don’t they buy this? Because there are many better ways to fight poverty and support these workers, like increasing the child tax credit and the minimum wage – efforts that Republicans have blocked.

Trump’s promise is an election-year hoax that Senator Ted Cruz seized on and parlayed into a bill to eliminate the income tax on tips. Kamala Harris has fulfilled Trump’s promise, so this has become an unfortunate race to the bottom.

But tax experts say few workers who receive tips benefit from them and many are disadvantaged. Here’s why.

  • For most employees, the savings would be small or non-existent: Trump’s proposal might help a relatively small number of waiters at fancy restaurants, but many employees who get tips – including two-thirds of restaurant workers – make so little that they don’t pay federal income tax anyway and thus would get no benefit. Of course, the more than 95 percent of low- and middle-wage workers who don’t get tips would also be left out. And why should a waiter pay less federal income tax than someone who makes the same salary and happens to work in a supermarket or warehouse? What’s the logic behind it? There is none. This isn’t about tax fairness, just political expediency for Trump.
  • Tips would explode, which would harm employees: Trump’s proposal could “suck the momentum” out of efforts to raise the minimum wage for tipped workers, writes Howard Gleckman, a senior fellow at the Tax Policy Center. Raising the minimum wage would be a better way to help those workers than cutting taxes that most of them don’t pay. And that missed opportunity would hit hardest the many employees who receive only a small portion of tips, like dishwashers. Currently, the minimum wage for tipped workers is just $5.26 an hour in New Jersey, and even less in other states: The federal minimum wage is just $2.13 an hour. Instead of raising that, Trump would encourage employers to convert a larger portion of worker compensation into tips. People have a right to a predictable paycheck; they shouldn’t have to rely on fickle generosity. “Frankly, it’s a subsidy for people who are attractive and smile,” says Brendan Duke of the Center for American Progress Action Fund. And if you’re annoyed at how many transactions now include a tip request, just wait until Trump signs it into law. “I would definitely expect that to explode,” Duke says. Imagine going to the doctor or an auto repair shop and being expected to tip the receptionist or sales clerk.
  • This could easily be manipulated: High-income individuals such as corporate lawyers, hedge fund managers or accountants have a strong incentive to negotiate an agreement with their clients to convert their compensation into tax-free tips, and there are few safeguards to prevent this. A new system of tax evasion.
  • Employees who receive tips could lose entitlements: Trump said he would eliminate taxes on tips, but did not specify which taxes: Just federal income tax? Or payroll tax too? If he decides that workers who receive tips should not pay taxes on Social Security and Medicare, they would receive lower benefits in retirement because benefits are based on contributions.

Trump plans to shower even bigger tax cuts on corporations and the wealthy by extending and even expanding his 2017 tax cut. He’s tacking on gratuities to the proposal to make it seem like he’s helping the working class. But this is just another sham – “the Trump University of tax plans,” as Duke put it.

“If your party is systematically opposed to unions, opposed to a higher minimum wage, opposed to things like paid family leave, opposed to overtime, then the fact that you found Hulk Hogan and Kid Rock and put them on stage does not make you a friend of the working class,” Pete Buttigieg observed. “It’s the substance that counts.”

That’s right. If we really want to help these workers, we need to raise the minimum wage. Vice President Kamala Harris and President Biden are also proposing to increase the child and earned income tax credits, which would provide tax relief not only to waiters but also to other low-income workers like home health aides, security guards and janitors.

What they deserve is real reform, not just some trick that helps only a few.

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