Anika Begay
U.S. Vice President Kamala Harris (left) and former President Donald Trump
News
Vice President Kamala Harris has pledged to eliminate tip taxes in the service and hospitality industries if she wins the presidency, echoing a proposal announced months earlier by former President Donald Trump.
Both candidates promised tax-free tips at separate rallies in Las Vegas, appealing directly to voters in Nevada, a key state where the hospitality sector employs about a quarter of the state’s workforce, according to June employment data.
“It “It’s my promise to everyone here: When I’m president, we’re going to continue our fight for America’s working families, including to raise the minimum wage and eliminate tip taxes for service and hospitality workers,” Harris said at her Las Vegas rally Saturday, which drew a crowd of more than 12,000, according to the campaign.
The proposal came a day after the Culinary Workers Union, a major Nevada labor group, endorsed Harris. Before her rally Saturday, Harris said her campaign plans to unveil a formal economic policy platform in the coming days.
Trump quickly took to social media to claim credit for the proposal, which he himself advanced in June during his rally in Las Vegas.
“[Harris] He has no imagination whatsoever, as evidenced by his game of “COPYCAT” with “NO TIP TAX!” Trump wrote in a post on Truth Social on Saturday night.
Banning tip taxes would require new legislation and congressional approval, a Harris campaign representative later acknowledged.
The campaign representative said Harris would work with lawmakers in Congress to craft a tax-free tips policy that would include an income cap and requirements to prevent “hedge fund managers and lawyers from structuring their compensation in a way that seeks to take advantage of politics.”
These warnings respond to numerous criticisms that have already emerged regarding the ban on taxing tips.
According to the nonpartisan Committee for a Responsible Federal Budget, eliminating the tip tax on services would leave a hole in federal revenues over the next decade of between $150 billion and $250 billion.
In addition to the damage to government revenue, some economists argue that a tax-free tip policy would not effectively achieve its goal of easing the tax burden on low-income Americans.
“The policy goal is to reduce the tax burden on low-income workers,” Ernie Tedeschi, economics director of Yale University’s Budget Lab, told Vscek in June after Trump first floated the idea. “This is not a well-targeted, efficient way to do it.”
He noted that only a small portion of the low-income workforce works in tipped jobs, and many of those workers are young or already pay no income taxes because of their low earnings.
He also argued that the policy could create a hierarchy of low-wage jobs in which only some workers reap the benefits of tax-free income. And he said the tiered approach could force employers to try to game the system, such as encouraging more tips instead of raising wages.
“What would an economy look like where we incentivize tipping so much?” Tedeschi said. “I imagine smart tax lawyers and accountants, if they think about it for a while, will come up with really smart ways to take advantage of that.”
