First, the good news: In an otherwise polarizing and divisive election, there is at least one policy proposal that is emerging as a unifying theme. The bad news is that most experts think this idea is terrible.

The proposal would eliminate the federal tax on tips. Donald Trump first floated the idea at a campaign rally in June, and it gained so much traction that signs reading “No Tax on Tips” regularly appeared at Trump’s campaign rallies and the Republican National Convention. Now even his opponent, Vice President Kamala Harris, supports the idea. “I promise everyone here: If I’m president, we will continue our fight for America’s working families, including by raising the minimum wage and eliminating the tax on tips for service and hospitality workers,” she told a crowd over the weekend.

In a series of social media posts, Trump accused Harris of stealing his idea, saying, “She sounds more like Trump than Trump, she copies almost everything.”

On the surface, exempting tips from the tax may sound like a pro-worker proposal with populist appeal that could potentially increase the take-home pay of service workers who rely on tips for their livelihood. But it doesn’t really hold up under scrutiny. And that’s because, at best, “no tax on tips” looks less like a tax cut for low- and middle-income families and more like a subsidy for big business.

“I’m not saying by any means that workers aren’t going to get anything,” said Heidi Shierholz, president of the Economic Policy Institute. “But I think a significant portion of the (federal) spending on a tax exemption like this is going to go to the employers of the workers who receive tips.”

That may be why industry lobbyists support the proposal. “It’s no surprise that the National Restaurant Association likes this,” Shierholz said, referring to the lobbying group that represents many of the country’s major restaurant chains.

In the worst case, tax policy could even put downward pressure on wages in the service sector by allowing employers to keep their workers’ base salaries low because the tax cut could instead increase workers’ take-home pay.

“I think there is no doubt that it would depress wages,” Shierholz said. The only question, she says, is how much.

“No tax on tips” may be a good slogan or campaign slogan, but it does not necessarily mean it is a smart policy.

The problem with tipped wages is not that they are taxed too highly, but that they typically pay little, and that workers who receive tips rely on the kindness of strangers to make ends meet. In 2023, for example, the median annual wage for waiters was just under $32,000, according to the Bureau of Labor Statistics.

In fact, as the Tax Policy Center put it, eliminating the income tax on tips would do little to nothing for many workers who receive tips because their earnings are so small that they are already exempt from paying federal income tax.

“It’s hard to deny that the vast majority of middle- and low-wage workers are being left out,” said Brendan Duke, senior director for economic policy at the Center for American Progress. “We know that 95 percent of low- and middle-wage workers are not tipped, and only about a third of those workers who are tipped pay income tax and would benefit from it.” (Duke was speaking specifically about Texas Senator Ted Cruz’s proposed legislation on the issue.)

One reason tipped workers are paid so poorly is that the federal government only guarantees them a subminimum wage of $2.13 per hour. If a worker’s earnings, combined with tips, are still below the federal minimum wage of $7.25 per hour, employers must make up the difference. (Many states and localities have wage requirements that are higher than the federal minimum wage, but these often include exceptions with lower hourly minimum wages for tipped workers.)

That’s why some states have eliminated the minimum wage for tipped workers altogether. Because by allowing employers to pay their workers less, they’re essentially passing their labor costs directly onto their customers. And while most Americans are used to tipping, those who don’t — or at least threaten to — create a hostile work environment for workers and make it harder for them to earn a fair wage. Some studies have also shown that tipped wages encourage workers to discriminate against people of color and provide them with worse service based on racist stereotypes about who is more likely to tip generously.

One of the biggest concerns about eliminating the federal tax on tips is that it would discourage businesses from offering more competitive wages. Because if workers’ take-home pay increases because of a tax cut, employers would not have to pay tipped workers a higher base wage. In fact, it’s a tax cut that could mostly subsidize businesses’ payroll costs, not workers’ cost of living.

“This will reduce the need for employers to raise wages,” said Shierholz of the Economic Policy Institute.

Additionally, creating a tax break for employees who receive tips could create a major loophole for employers who want to pay their employees less. For example, some industries could simply become part of the tip economy, making more of their employees rely on tips rather than minimum wage.

The rule would “incentivize employers to hire more workers in tipped jobs,” Shierholz said. “(Employers) could lower the base wages they pay their workers under the guise of doing something for the workers. They could say, ‘We’re tipping you because you don’t have to pay taxes,’ and then in the fine print say, ‘Oh, also you’re going to make $2.13 an hour in base wages.'”

Therefore, implementing other policies, such as eliminating the subminimum wage, would do much more to raise wages than eliminating the tip tax. For example, the poverty rate for tipped workers is lower in states without a subminimum wage than in states with a subminimum wage.

“If you really want to help workers who receive tips, there are other ways that are far better,” Shierholz said, adding that federal funds would be better directed toward programs like the child tax credit or the earned income tax credit, which are much better targeted at workers who need it.

So if politicians want to promote a pro-worker agenda, they should outline policies that will actually lead to higher wages, as Harris did, who also advocated raising the minimum wage. Otherwise, they may just be pushing for another tax cut for the rich. After all, that may be why major business lobby groups advocate “no tax on tips” – to avoid actual wage increases.