• Vice President Kamala Harris promised to eliminate the tax on tips if she wins the presidential election, echoing a proposal made by Donald Trump in June.
• Both candidates promised tax-free tips at rallies in Nevada, a key swing state where about a quarter of the state’s workforce is employed in the hospitality industry.
• Economists and budget experts have criticized the draft policy, saying it will burden federal revenues and is unlikely to reduce the tax burden on low-income earners as intended.

Vice President Kamala Harris promised to eliminate the tax on tips in the service and restaurant industries if she wins the presidential election, echoing the same proposal announced by former President Donald Trump months earlier.

Both candidates promised tax-free tips at separate rallies in Las Vegas, appealing directly to voters in Nevada, a key swing state where about a quarter of the state’s workforce is employed in the hospitality industry, according to June employment figures.

“It “I promise everyone here that when I am president, we will continue our fight for America’s working families. That includes raising the minimum wage and eliminating the tip tax for service and restaurant workers,” Harris said at her rally in Las Vegas on Saturday, which the campaign said attracted more than 12,000 people.

The proposal came a day after the Culinary Workers Union, a major Nevada union, endorsed Harris. Before her rally on Saturday, Harris said her campaign plans to unveil a formal economic policy platform in the coming days.

Trump quickly took to social media to echo the suggestion he made at his own rally in Las Vegas in June.

“(Harris) has no imagination whatsoever, as evidenced by the fact that she played ‘copycat’ with ‘NO TAXES ON TIPS!'” Trump wrote in a Truth Social post Saturday night.

Banning taxation on tips would require new laws and congressional approval, which a Harris campaign official later acknowledged.

The campaign official said Harris would work with members of Congress to develop a tax-free tipping rule that would set an income limit and include requirements to prevent “hedge fund managers and lawyers from structuring their compensation in a way that would try to profit from this rule.”

These reservations are a response to numerous criticisms that have already been raised regarding a ban on taxing tips.

According to the bipartisan Committee for a Responsible Federal Budget, eliminating the tax on government tips would leave a hole of $150 billion to $250 billion over the next decade.

Beyond the government’s loss of revenue, some economists argue that the goal of a tax exemption on tips, namely reducing the tax burden on low-income Americans, cannot be achieved.

“The policy goal is to reduce the tax burden on low-income earners,” Ernie Tedeschi, economics director at Yale University’s Budget Lab, told CNBC in June after Trump first proposed the idea. “This is not a targeted and efficient way to do that.”

He pointed out that only a small portion of low-income workers work in tipped jobs, and that many of those workers tend to be younger or pay no income tax anyway because of their low income.

He also argued that the policy could create a hierarchy of low-wage jobs in which only some workers benefit from tax-free income. And he said this tiered approach could force employers to game the system, for example by encouraging more tips rather than raising wages.

“What would an economy look like where we rewarded tips so heavily?” Tedeschi said. “I imagine smart tax lawyers and accountants, just thinking about it for a minute, would come up with really clever ways to take advantage of it.”