Report Exposes Trump Proposal to Stop Taxing Tips as 'Hollow Promise'

Most U.S. workers who rely on tips to supplement their often meager incomes would see no benefits from a tax exemption proposed by former President Donald Trump that the authors of a report published Tuesday called a "hollow promise."

The report—published by One Fair Wage and the Food Labor Research Center at the University of California, Berkeley—details how the proposal by Trump, the Republican nominee for president, and Sen. Ted Cruz's (R-Texas) related No Tax on Tips Act would deliver little relief to tipped workers.

According to One Fair Wage, "66% of tipped restaurant workers would not benefit from tax exemptions on tips because they or their households do not earn enough to pay income taxes."

"Trump tried to make tips the property of owners the last time he was in office, so he's clearly NOT a genuine advocate for working people."

While the proposal may seem beneficial to tipped workers, the group said it "falls too short of having a real impact and fails to address the fundamental issue facing working-class Americans: the need for a stable, living wage."

According to One Fair Wage, the report's key findings include:

• Tipped restaurant workers earn a median income of just $15,198, a mere 37% of the national median income of $40,480;
• Over 95% of these workers earn less than $53,000 annually, with nearly half earning below the federal income tax threshold of $13,850, making them ineligible for significant tax benefits; and
• The proposal does not address the core issue of higher wages and economic insecurity: The subminimum wage for tipped workers, currently $2.13 per hour federally, perpetuates economic instability, high rates of sexual harassment, and poverty among workers, which tax relief on tips does not address.

While Trump has picked Sen. JD Vance (R-Ohio) as his running mate in an apparent bid to win over working-class workers, President Joe Biden on Sunday left the race and endorsed Vice President Kamala Harris to become the Democratic presidential nominee.

"Regardless of who's on the ticket, it's clear that candidates who want to win this cycle should address the needs of working people," One Fair Wage president Saru Jayaraman said in a statement. "Let's remember that for his part, Trump tried to make tips the property of owners the last time he was in office, so he's clearly NOT a genuine advocate for working people."

"In contrast, low-wage voters will be asking, What are Democrats providing as an alternative?" Jayaraman added. "In order to reach this critical voting bloc, their response should be loud and clear: It is time to raise the minimum wage and end the subminimum wage for tipped workers."

In a recent interview, Jayaraman told Common Dreams that "the restaurant industry has used tips for 150 years in place of what people need, which is a stable base living wage with tips on top."

"It is helpful, for sure, to not have your taxes tipped, but that is a red herring," she added. "That should be on top of what workers really need."

Last week, the Center for American Progress (CAP) published an analysis that found Cruz's bill is "deeply flawed": In addition to excluding 95% of low- and moderate-wage workers who are not working tipped jobs, "it contains few, if any, guardrails to prevent high-income professionals such as hedge fund managers from shifting their compensation to a tax-free tipping model."

"The No Tax on Tips Act potentially kicks the door wide open for tax abuse by the wealthy and fails to deliver any meaningful tax cuts for low- and moderate-wage workers," said CAP senior director for economic policy Brendan Duke. "Just 5% of all workers making less than $25 per hour receive tips. And even among those that do receive tips, the tax cuts would be minimal at best."

Duke asserted that restoring the American Rescue Plan's earned income tax credit and child tax credit expansions would broadly benefit "both tipped workers such as waiters and nontipped workers such as home health aides."