New data pulls back the curtain on Trump’s tips proposal

25 July 2024

During the 2024 Republican National Convention in Milwaukee, presidential nominee Donald Trump promoted his proposal to eliminate taxes on tips.

Sen. Ted Cruz (R-Texas) is on board with Trump's plan, introducing a bill that would eliminate federal income taxes on tips. Cruz's bill has been dubbed the No Taxes On Tips Act of 2024.

But Axios' Emily Peck reports that according to new data from the U.S. Census Bureau, Trump's proposal would, if enacted, offer no substantial benefit to most tipped workers.

Peck reports, "Two-thirds of restaurant workers who work for tips earn so little that they don't pay federal income taxes, per a new report parsing data from the Census Bureau's American Community Survey…. Last month, former President Trump proposed eliminating taxes on tips — part of his more explicit appeal to the working class — but it's hard to see how that would benefit workers."

Peck notes that according to U.S. Labor Department data, the "median hourly wage for waiters and waitresses is $15.36 per hour" when tips are included. But "few" of those workers, she reports, are getting a full 40-hour work week.

"That's according to Alex Morash, director of research at One Fair Wage, an advocacy group for tipped workers that put together the report in conjunction with the Food Labor Research Center at UC Berkeley," Peck reports. "As a result, their annual income tends to be very low. Looking at self-reported income for all kinds of tipped restaurant workers, including servers, bartenders, barbacks and bussing staff, Morash's group found that nearly half earn less than $13,850 — the threshold you have to meet to pay income taxes."

Peck adds, "Roughly two-thirds live in households that don't make the income-tax threshold."

The Axios reporter explains that although "eliminating the income tax on tips would help higher-earning tipped workers," the report found that 95 percent of them are making less than $53,000 per year.

The Tax Policy Center's Howard Gleckman, in a June 17 article, wrote, "Many of these workers make so little that they will not come close to paying federal income tax under current law and thus would not benefit at all from Trump's proposal."

Gleckman pointed out that eliminating the payroll tax (which includes Social Security taxes) for tipped workers might increase their paychecks, it would hurt them down the road because "no tax payments" on payroll means "no benefits" later.

Read Axios' full report at this link.

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