Lawmakers Propose Tax Cuts for Tips

Both former President Donald Trump and Vice President Kamala Harris have proposed eliminating federal taxes on tips, a move that has sparked significant debate over its potential economic implications. Critics argue that the proposals lack necessary safeguards, potentially benefiting high-income earners who might reclassify their wages as tips, while only a small fraction of workers benefit directly. For instance, Rep. Steven Horsford is introducing the Tipped Income Protection and Support (TIPS) Act, which seeks to eliminate tax on tips while abolishing subminimum wages, aiming to protect lower-income workers from exploitation. In contrast, tax experts warn that such legislation could cost the government around $107 billion over ten years and could unintentionally incentivize businesses to shift more employees to tipped positions. Lawmakers across various states, including Ohio, are also considering similar measures, highlighting the growing focus on the financial struggles of service workers amid rising living costs. Overall, while the proposals aim to provide relief to service workers, their execution remains fraught with potential pitfalls that could undermine the intended benefits.