We have a long way to go until the 2024 presidential election, but it seems like one thing is certain: No matter who wins, there will probably no longer be taxes on tips.
Back in June, President Trump blurted out to a crowd in Nevada, “no taxes on tips” after it “just came to [him]” one day. A few weeks later, Kamala Harris decided to jump on the tip train, and is now also pushing for no taxes on tips. At the time of writing, this seems to be the only actual policy the Vice President actually has. In this crazy, polarizing campaign, the one thing both candidates agree on is that there should be no income taxes on tips. But nobody has answered a very simple question: Why?
Why should there be no taxes on tips? Are tips not income? Put aside the fact that many in the service industry do not report tips on their taxes. That is not what is happening here. This is for those who do report tips on tax forms. But why should we just allow it to stop? From all information available online, there seems to be two primary reasons to stop taxing tips: It’s difficult to calculate, and it helps low-wage earners.
Both of these reasons are, in fact, ridiculous. The easier one is the calculation process. This is no different than any independent contractor or small business owner - especially those who are paid partly in cash - to calculate. A musician playing a wedding could be paid in cash. So could a landscaper, florist, or shopkeeper. Anyone who pays taxes and doesn’t work for a larger organization has to track their own income for tax purposes.
Then we have the fact that many in the service industry are lower-level employees and low-income earners. That’s fine. We already have a system in place for low-wage earners. They’re called tax brackets. The less one earns, the less one pays in taxes. Pretty simple, right? This type of thing would not apply to custodians or supermarket checkout clerks, two industries not known for their high wages, yet also not paid on tips. No, only a select set of low-wage earners will earn their income tax-free.
There is another element here. And that is the concept of mandatory tipping. I have been reliably told that tipping in a restaurant is not optional. Tipping is the actual income for my severs. Well, if that is the case, then why is it not taxed? Is it income or is it not? If it is not income, then why am I being required to pay it? If it is income, then why should it have the distinction of not getting taxed?
So it’s time to stop beating around the bush. Let’s just call this what it is: buying votes. This is no different than Biden vowing to eliminate student debt. It is a way to say to a specific segment of the population that you can now have more money than you did before, but only if you elect a particular candidate. Why student loans over mortgages or car loans? Why tips over any other form of income? ¯\(ツ)/¯ Both candidates promoting this simply want to purchase votes from a segment of the population they think will deliver them a victory in November. And the rest of the population will have to pick up the slack.
There is one difference between student loan forgiveness and no taxes on tips. When eliminating taxes, you are allowing people to keep the money they’ve already earned. On the other hand, when wiping away a debt, you are rewarding the borrower with allowing to keep unearned and already-spent money. That is a major difference. The practical difference is based on what happens next. If a “no tax on tips” policy leads at some point down the road to the reduction or elimination of income tax altogether, I would be for it, but let’s take a look back at who is proposing these policies: Donald Trump, who thought it and said it, with no regard to how it will work (which seems to be a pattern of his), and Kamala Harris, who in no universe would eliminate income taxes.
Until someone can explain why tips are magically different than all other forms of income, this policy reeks of buying votes.
Izzo Zwiren works in healthcare administration, constantly concerning himself with the state of healthcare politics. The topic of healthcare has led Izzo to become passionate about a variety of political issues affecting our country today. Aside from politics, Izzo is a fan of trivia, stand-up comedy, and the New York Giants. Izzo lives on Long Island with his wife and two adorable, hilarious daughters.
