Outside the Starlite Burger and Coney Shop in Burton on Friday, Michigan Republican Party Chairman Pete Hoekstra and Republican candidate for the U.S. House of Representatives Paul Junge spoke with owner Jason Hester and members of his staff about former President Donald Trump’s proposal to eliminate the tax on tips.

Trump first brought up the idea at a rally in Nevada earlier this summer. Some saw the proposal as an attempt to win votes in the swing state, which has many service sector workers. He later explained that the proposal would eliminate both payroll and income taxes on tips, a move that requires congressional approval.

Earlier this summer, the Michigan Restaurant and Lodging Association published the Results of the State of the Industry Operations Survey Detailed description of the impact of inflation and COVID-19 on the hospitality industry in Michigan.

Michigan Supreme Court hears arguments on minimum wage change

According to the survey, sales are declining, with only one in four restaurants reporting an increase in sales last year. Sixty percent of restaurants reported fewer customers than a year ago, and 45 percent of restaurants reported a drop in sales last year as inflation led to higher menu costs.

In addition, representatives of the catering industry and small businesses raised the alarm about a recent Michigan Supreme Court decision on two ballot initiatives that, if implemented, will raise Michigan’s minimum wage from the current $10.33 to over $12 an hour and increase tipped wages in the coming years until subminimum wages are phased out.

The Michigan Restaurant and Lodging Association warned that the new rule is set to take effect on February 21 and that one in five restaurants will have to close due to the minimum wage increase and the elimination of the tip credit.

While the decision provoked mixed reactions from DemocratsHoekstra sharply criticized the move, calling it disruptive and arguing that Democrats have supported efforts to increase staff at the Internal Revenue Service (IRS), with the agency using $80 billion in Inflation Reduction Act funds to hire 87,000 new employees in 2022 after announcing its plan to hire more staff the year before.

Politifact reported that these new hires were not only in areas such as auditing or law enforcement, but that the funds also went into operational support, taxpayer services, and modernizing the agency’s business systems.

“The Democrats are hiring 87,000 additional IRS agents to make sure they find every tip that’s out there and to make sure these people pay more taxes and spend more money for the government,” Hoekstra said.

“The Republican approach is very, very different. Donald Trump is aware of that. You know what? I think the government is big enough and spends enough. We don’t need to find more ways to raise money for the government. Let’s just limit the appetite of the government. Let’s not disrupt industry,” he said.

Hoekstra and Junge both criticized Vice President Kamala Harris for her own plan to repeal the tip tax, saying she will not keep her promise. Junge is running in the open 8th District against state Sen. Kristen McDonald Rivet (D-Bay City).

Unlike Trump’s plan, which would eliminate both payroll taxes and federal income taxes on tips, Harris’ proposal would maintain the payroll tax used to fund Social Security and the Medicare program. At the same rally where she introduced the proposal, Harris also promised to raise the national minimum wage.

The Committee for a Responsible Federal Budget has forecast Trump’s proposal Exempting tips from federal income and payroll taxes would reduce federal revenues by $150 to $250 billion over 10 years, while Harris’ plan would lead to deficits of $100 to $200 billion within ten years.

While the tipped wage in Michigan is currently less than $4, Hester says his waiters can earn up to $20 an hour in tips. He argues that implementing a higher minimum wage would discourage customers from tipping.

“Under President Trump, the service sector, the industry where people rely most on tips, will have a significantly better revenue stream than it does now for the first time in four years,” Hester said.

“They will be able to provide for their families… they will take home what they deserve and what is rightfully theirs,” Hester said.

Danielle Shock, a longtime waitress at Starlite, said she would bring home $300 to $400 more per week under Trump’s proposal.

“If I get paid minimum wage, no one will care how I treat them. They won’t tip. It will just be a simple interaction,” Shock said.