Vice President and likely Democratic presidential candidate Kamala Harris announced at a campaign rally in Las Vegas on Saturday that she would support raising the federal minimum wage and eliminating the federal income tax on tips for service workers, including restaurant employees.
“We will continue our fight for America’s working families, including raising the minimum wage and eliminating the tip tax for service and hospitality workers,” Harris said during the rally.
Harris’ campaign staff later told the media that she would work with Congress to draft legislation that would impose an income limit and other requirements that would prevent high earners such as hedge fund managers from taking advantage of the federal tip tax exemption policy.
The presidential candidate supports repealing the tip tax alongside Republicans in Congress and the Trump campaign, suggesting that this policy viewpoint is popular and could gain bipartisan support regardless of whether Harris or Trump is elected president in November. Former President Trump later accused Harris of “stealing” his policy ideas on his social media platform, Truth Social.
The “no tax on tips” policy was first proposed last month by Senators Ted Cruz (R-Texas), along with Steve Daines (R-Montana), Rick Scott (R-Florida), and Kevin Cramer (R-Dakota), who introduced the No Tax on Tips Act, which would exempt cash tips from federal income taxes starting in 2025. Employers would still be required to pay their share of payroll taxes. Employees would also still be subject to any state taxes on their tips.
Although Harris did not specify how much she would raise the federal minimum wage if elected president, the Biden White House’s last attempt to raise the federal minimum wage to $15 an hour in 2025 failed in March 2021 after Congress removed the bill from the U.S. rescue plan.
Starting in August 2024, the minimum wage in seven states plus Washington, DC (California, Connecticut, Maryland, Massachusetts, New Jersey, New York, and Washington) will be at least $15 per hour. In addition, 30 out of 50 states have a higher minimum wage than the federal minimum wage of $7.25, which has remained unchanged since 2009. In California, which implemented a statewide minimum wage of $20 per hour specifically for fast-food workers, restaurants in the state have raised prices and are already seeing fewer customers since the law passed in April.
Both measures have been criticized by critics who claim they would have a significant impact on the country’s budget deficit: According to the Committee for a Responsible Federal Budget, eliminating the tip tax and raising the minimum wage would double the budget deficit from $100 billion to $200 billion over the course of a decade.
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