Former President Donald J. Trump‘s proposal to end the taxation of tip wages could see workers in the service industry save billions of dollars every year. Analysis by the Committee for a Responsible Federal Budget suggests that no longer subjecting tips to federal income taxes would result in a $250 billion tax cut over a 10-year budget window.
Under the Internal Revenue Service (IRS) statute, all tip income workers earn is subject to federal income taxes. Ending the taxation of tips would require Congressional action to amend the federal tax code and direct the IRS to stop collections on that source of income. However, it appears former President Trump‘s idea has gained traction among Republican lawmakers on Capitol Hill.
“This thing has really just organically caught fire,” Representative Tim Burchett (R-TN) said on Monday, noting the plan is “smart politics.” Burchett isn’t alone. Senator Ted Cruz (R-TX) called the plan “terrific.”
“For someone that’s working as a waiter or waitress or someone that’s working as a taxicab driver or someone who’s working as a bellhop at a hotel, there are a lot of people who are starting to climb the economic ladder who rely on tips,” Cruz said, noting: “The caricature of Republicans is that Republicans were the party of the rich and Democrats are the party of the poor and the working class.”
Trump’s tax proposal comes amid a concerted effort by the presumptive Republican presidential nominee to continue his outreach to working-class voters. In the 2016 and 2020 elections, Trump made significant gains among white and Hispanic working-class voters who had typically voted Democrat in the past.
