No Tax on Tips? Democrats Could Learn Something From Effective GOP Pandering to the Working Class

“This legislation will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers, the very people who are living paycheck-to-paycheck. I urge my colleagues in the House to pass this important bill and send it to the President’s desk to be signed into law.” —Senator Ted Cruz (R-Texas)

Ted Cruz? How could this labor-hating showboat get away with posturing as a defender of the working class – especially low-wage workers who live on tips? This is the same Ted Cruz who gets most of his campaign funds from those who got rich by exploiting low-wage workers. How did Cruz, of all people, take this issue away from the Democrats, the once so-called party of the working class?

It seems the Democrats didn’t care about this issue. It was viewed by the party policy makers as flawed and not worth the effort. They only got on board after Trump trumpeted the policy change, which they then noticed was wildly popular with the public.

What does it say when Ted Cruz appears to be considering the needs of working-class people before the Democrats get around to them?

Even today, after Cruz and Trump, my progressive colleagues disparage removing taxes on tips. They correctly point out it would be better to increase the federal minimum wage for all workers, which now stands at $7.50, and $2.13 for tip workers. $2.13? Further, they argue that low-wage workers would be better served with the passage of paid family leave, refundable tax credits, and extensive universal health care.

Those are all good ideas, but wouldn’t no tax on tips complement those policies?

The progressive Economic Policy Institute claims that no tax on tips “will harm more workers than it helps.” It will

1. “Help very few workers and undermine pay increases for many more.
2. Expand the use of tipped work—a system rife with discrimination and worker abuse— potentially leading to consumers being asked to tip on virtually every purchase.
3. Deplete state and federal budgets and create new avenues of tax avoidance, especially for high earners.”

EPI makes similar arguments for no tax on overtime, saying the policy will:

1. “Encourage excessive hours of work while exacerbating inequities between workers able to work long hours and those who cannot.
2. Put downward pressure on base wages.
3. Open up a tax loophole easily gamed by high earners that would drain public budgets while further complicating the tax system.”

I have enormous respect for my brothers and sisters at the EPI. They do excellent research on behalf of working people. But in this case, I fear they are missing or ignoring the bigger political picture. The Democrats and the left should never allow the Republicans to position themselves as working-class heroes. Helping low-wage workers should be what Democrats do and no tax on tips and no tax on overtime—done right—should have been part of the party’s package before it became part of Ted Cruz’s.

For those of us who have worked for tips and valued overtime pay, getting a tax break simply means more money in our pockets. It is an immediate pay raise, even if it may not be the best way to improve the standard of living for working people. I’m having trouble understanding why a direct good for some is not a good thing.

Most tipped workers earn low wages in the food industry and in gig services like Uber. They are grossly underpaid. So much so that many don’t work enough to pay income tax and so won’t benefit, but for those who make enough getting a tax break will help. That’s appealing, which is why about 75 percent of Americans support the idea, according to a 2024 Ipsos survey.

The same goes for overtime. Nearly two-thirds of all workers are forced to work overtime as a condition of their employment. Work weeks are often extended to 50 hours or more as employers seek to avoid hiring new workers and paying their benefits. It is cheaper to run the existing workforce into the ground. But those extra hours at time-and-half are taxed more heavily, workers know, making it feel like all that extra work is getting you nowhere. A tax break will be welcomed, not shunned, by those workers.

Trump filled the breach, making the proposal in a speech in Las Vegas in June 2024, and the Harris campaign chimed in half-heartedly in support of the proposal after she entered the race in July. The two Democratic senators from Nevada, the state with the most service workers per capita, fully supported Cruz’s effort.

After the bill passed unanimously in the Senate last week, Chuck Schumer, the minority leader, belatedly weighed in with: “Working Americans—from servers, to bartenders, delivery drivers, and everything in between—work hard for every dollar they earn and are the ones who deserve tax relief, not the ultra-rich.”

Nice words for the Ted Cruz-sponsored bill, but why wasn’t a Democrat proposing this appealing policy? And where was Chuck, years ago, when runaway inequality was decimating the lives of low-wage tip workers? He was celebrating a strategy that cast aside working people in favor of higher income, more educated Republican voters. As he infamously put it in 2016:

"For every blue-collar Democrat we lose in western Pennsylvania, we will pick up two moderate Republicans in the suburbs in Philadelphia, and you can repeat that in Ohio & Illinois & Wisconsin.”

In addition to picking up Republican votes, he wants those fat campaign donations especially from those “moderates” working on Wall Street.

If the Democrats ever hope again to be the party of the working class, they should never have allowed the Republicans to get credit for such a popular proposal. What does it say when Ted Cruz appears to be considering the needs of working-class people before the Democrats get around to them?

It didn’t happen because, I truly fear, that the Democrats really have no strategy and no desire to become again the party of the working class. They seem quite content to allow the Republicans fill the breach. Good riddance!

Meanwhile, the Republicans crush the government workers who protect our air and water, workplace safety, workers’ rights to organize, public health programs, and scores of programs and projects designed to make sure that working people aren’t exploited and damaged by corporate interests that treat them as fodder in a profit-making machine. No tax on tips is exquisite Republican pandering, and an effective one.

Which leaves us at a crossroads we can no longer avoid or pretend just isn’t there or view as too difficult to achieve. The billionaires indeed have two parties. We need one of our own.