Should tips no longer be taxed?
This bill seeks to exempt tips from federal income tax. Under the bill, employees in traditionally tipped occupations may deduct up to $25,000 in cash tips from their federally taxed income each year. Eligibility is limited to tips that are reported to the employer for payroll tax purposes, and to those who earn less than $160,000 in a year. Additionally, this bill would expand the existing payroll tax credits to employers for tips in industries related to beauty and personal care. Sponsor: Sen. Ted Cruz (Republican, Texas)
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Opponents say
• "It’s insane. We’re going to increase the deficit with this. Why would I vote for that? You can’t cut taxes without cutting spending, and they’re not really cutting spending." Source: Rep. Thomas Massie (Republican, Kentucky, District 4)
• "There are better ways Congress can help low-wage workers than eliminating taxes on tips, including by expanding the standard deduction — giving a meaningful tax cut to all low-wage workers, not just those who receive tips — or by finally getting rid of the subminimum wage. And they might consider increasing the minimum wage while they’re at it. After all, a raise is long overdue." Source: Abdallah Fayyad (Correspondent at Vox covering social and economic policy)
• "By making one type of income (tips) exempt from income tax, while other types of income (most importantly, wages) remain taxable, the proposal would make more employees and businesses interested in moving from full wages to a tip-based payment approach. That would mean more service industries adopting the restaurant industry approach of a list price up front and an expected voluntary tip at the end of the transaction." Source: Alex Muresianu (Senior Policy Analyst at the Tax Foundation)
Proponents say
• "Florida’s tourism-driven economy thrives because of the hardworking men and women in our restaurant and hospitality industries, many of whom rely on tipped wages to support their families. I’m introducing the No Tax on Tips Act with Congressman Donalds to ensure that these essential workers are able to keep more of the money they’ve earned, without interference from Washington. As Vice Chairman of the House Ways and Means Committee, and a former Chairman of the Tax Subcommittee, cutting taxes for working Americans is my top priority." Source: Rep. Vern Buchanan (Republican, Florida, District 13)
• "For far-too-long, Washington’s focus has been on how much of your paycheck politicians and unelected bureaucrats will take to fund their destructive agendas. Americans deserve to take home more of what they have earned, especially given the self-inflicted economic hardships created by the Biden administration. I am proud to have introduced the ‘No Tax on Tips Act’ last Congress alongside Senator Cruz (R-TX) and look forward to its swift passage in the 119th Congress. Hardworking Americans across our Southwest Florida community, the Sunshine State, and the nation deserve a government that will put them first." Source: Rep. Byron Donalds (Republican, Florida, District 19)
• "In the coming weeks, I’ll be working with Congress to get a bill on my desk that cuts taxes for workers, families, small businesses, and, very importantly, keeps my promise for a thing called …. No tax on tips. So if you’re a restaurant worker, a server, a valet, a bellhop, a bartender, or one of my caddies — I go through caddies like candy, if I play badly, I always blame my caddy — or any other worker who relies on tipped income, your tips will be 100 percent yours." Source: President Donald Trump (Republican)
