By james art 
President Trump promised at a rally Saturday to follow through on his campaign promise to eliminate tip taxes.
“In the coming weeks, I will work with Congress to get a bill on our desk that cuts taxes for workers, families, small businesses and, very importantly, keeps its promise,” Trump said. “We’ll take it for you – no tip tax.”
The president, speaking at a Las Vegas casino, said tax cuts are at the top of his legislative agenda for this new Congress.
“If you’re a restaurant worker, a waiter, a valet, a bellboy, a bartender, one of my caddies,” the president said, “your tips will be 100 percent yours.”
Trump’s comments came in a 40-minute speech over the weekend that sounded more like a victory lap than a policy plan. The president rattled off a list of the changes he has made and proudly said he has already taken “nearly 350 executive actions to reverse the terrible failures and betrayals” he inherited. Trump has issued dozens of executive orders, actions and memoranda since taking office last Monday.
Trump first floated the “no tax on tips” idea in that same city last June during a campaign rally. “When I come into office, we’re not going to put taxes on tips, on people who give tips,” Trump said at the time, promising to do so “right away, first thing in office.”
The four-word slogan was plastered on billboards, and Democratic presidential candidate Kamala Harris floated a similar version of the idea. He was so popular among some voters that Trump credited him with helping him win the key state of Nevada in the presidential election.
The president cannot unilaterally change the tax code. But much of Trump’s sweeping 2017 tax law expires at the end of 2025. and it would give Congress an opportunity to change existing tax policy.
Earlier this month, Nevada’s two Democratic senators joined forces with a group of Republicans to reintroduce legislation this would exempt the tips from federal income taxes. “It’s something that can attract more people to the restaurant workforce. We are a chronically understaffed industry,” said Sean Kennedy of the National Restaurant Association, which endorsed the bill.
But even if this idea of ”no tax on tips” has some industry support and some bipartisan political support, tax experts and economists don’t like it.
“I think it’s actually a terrible policy,” said Heidi Schierholz, president of the Economic Policy Institute and a labor economist in the Obama administration. “If you really want to help tipped workers, do it directly by raising the federal minimum wage and phasing out the tipped minimum wage.”
She says she’s concerned the policy could slow momentum to overhaul the tipped minimum wage.
The federal minimum wage for tipped workers is $2.13, although some states have set a higher figure.
“There’s no real economic benefit to the idea,” said Bill Gale, co-director of tax policy at Urban-Brookings and an economist in the George H.W. administration. U. Bush. “It’s not a good way to help low-income workers because the majority of low-income workers don’t get tips,” said Alex Muresianu, senior analyst at the Tax Foundation.
“Why should a waiter who earns a large portion of his income from tips get a very large tax cut, and a cashier who earns little or nothing from tips should not get a tax cut?” he said.
According to Budget Lab at Yale Universitythe vast majority (over 90%) of low-income hourly workers do not receive tips.
And so Muresianou, Gale and Schirholtz argue that creating a carve-out solely for tipped workers could open the system up to more abuse, where high earners reclassify their income as tips. Gale also said it would make the tax code “more complex.”
“And to do that at the same time, you know, they’re trying to defund the IRS is just another example of why that’s a bad idea,” he added.
Then there is the issue of lost revenue. The Committee on a Responsible Federal Budget grades that removing tips from federal income and payroll taxes could reduce revenue by $150 billion to $250 billion over 10 years.
Despite experts’ concerns, the idea remains politically popular.
“I would say the economists have never worked for $2.13 an hour, so I don’t listen to much of what they say,” Ted Papageorge of the Nevada Culinary Union told NPR in response to concerns raised by experts.
Pappageorge said the union, which represents about 60,000 hospitality workers in the state, welcomes the idea of eliminating tip taxes.
“It has to happen,” he said, adding in the same breath that he also wants to see an increase in the minimum wage for tipped workers.
“The reality is that both are beneficial. And we challenge President Trump, Republicans and Democrats to do both,” saying he appreciates the idea of eliminating tip taxes but will also continue to fight on the other issue.
“This idea of $2.13 an hour is just obscene,” he said. “It really is.”
And so he will take the policy changes he can get for now. Because, he says, the lack of taxes on tips helps reduce the cost of living for working families who need immediate relief.
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