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Proposals like making tips tax-exempt, warns Hughes, "create incentives to drive even more low-paid service employees into the tipped worker category, harming many workers and their families."
Despite its embrace by the candidates from both major parties, this policy idea would do little to help the roughly 4 million people who work in tipped occupations while creating a host of problems.
While the next President faces a wide range of pressing tax policy choices to make — from the expiration of much of 2017’s Trump tax law to international corporate taxation and beyond — a relatively silly idea has become the tax focus on the campaign trail: exempting tips from taxes. Despite its embrace by the candidates from both major parties, this policy idea would do little to help the roughly 4 million people who work in tipped occupations while creating a host of problems.
Exempting tips from taxes isn’t a new idea. It’s been proposed before and always abandoned because it’s practically impossible to do without creating new avenues for tax avoidance.
Lower-paid service employees definitely deserve support. However, altering the tax code in this manner is a very leaky way of achieving that. It’s an approach that rich people with accountants and lawyers would surely be able to abuse. Fund managers, attorneys, and other high-paid professionals could easily reclassify their fees — or at the very least, some percentage of them — as mandatory tips for performance.
This proposal treats households with similar levels of income differently based on profession. Servers and bartenders, for example, receive a large portion of their income through tips and thus would receive a large tax exemption. Teaching assistants or health care workers might receive similar overall income but would not receive the same exemption.
Finally, these proposals create incentives to drive even more low-paid service employees into the tipped worker category, harming many workers and their families. Tipped workers have more unstable incomes than non-tipped workers, are more likely to live in poverty, and are more vulnerable to wage theft, according to the Economic Policy Institute (EPI).
The good news is that lawmakers have designed way better ways of helping working families. EPI and other experts on work and wages have put forth many ways to better help working families, from eliminating the sub-minimum wage that allows workers who receive tips to be paid a paltry $2.13 an hour, to raising all minimum wages above the $7.25 where it has been mired for a decade and a half, to making it easier for workers to unionize. In terms of tax solutions, lawmakers rightfully concerned about low-wage workers should instead consider expanding the Child Tax Credit and Earned Income Tax Credit (and especially making the latter stronger for workers without children in the home).
This country and this world are at a monumental crossroads. US voters have an opportunity to beat back the forces of fascism and confront the billionaires who are rigging the economy, our media system, and our democracy, making it increasingly impossible for ordinary people to get by. We’re not just talking about the election. We’re talking about what must be done once these fascist elements are vanquished from power. We need a bolder set of solutions than what either major party has so far been willing to offer and a working-class movement ready to fight like hell for it. Trump didn't emerge from nowhere. The conditions that fueled MAGA authoritarianism were created by decades of radical neoliberal economic policies and a corrupt political system dominated by corporate interests. They slashed taxes on the super-rich, promising that the benefits would trickle down. They said giveaways to the corporate titans would make life more affordable for the rest of us. It was all bullshit. And when a bitter, betrayed populace searches for someone to blame, right-wing demagogues have little trouble finding scapegoats. People know when they're being lied to, but you won't hear any of this from the corporate media. Only independent journalism—powered and funded by people who believe in building a better world—can deliver truly trustworthy daily news. If you share our vision, please contribute whatever you can to sustain our work. |
While the next President faces a wide range of pressing tax policy choices to make — from the expiration of much of 2017’s Trump tax law to international corporate taxation and beyond — a relatively silly idea has become the tax focus on the campaign trail: exempting tips from taxes. Despite its embrace by the candidates from both major parties, this policy idea would do little to help the roughly 4 million people who work in tipped occupations while creating a host of problems.
Exempting tips from taxes isn’t a new idea. It’s been proposed before and always abandoned because it’s practically impossible to do without creating new avenues for tax avoidance.
Lower-paid service employees definitely deserve support. However, altering the tax code in this manner is a very leaky way of achieving that. It’s an approach that rich people with accountants and lawyers would surely be able to abuse. Fund managers, attorneys, and other high-paid professionals could easily reclassify their fees — or at the very least, some percentage of them — as mandatory tips for performance.
This proposal treats households with similar levels of income differently based on profession. Servers and bartenders, for example, receive a large portion of their income through tips and thus would receive a large tax exemption. Teaching assistants or health care workers might receive similar overall income but would not receive the same exemption.
Finally, these proposals create incentives to drive even more low-paid service employees into the tipped worker category, harming many workers and their families. Tipped workers have more unstable incomes than non-tipped workers, are more likely to live in poverty, and are more vulnerable to wage theft, according to the Economic Policy Institute (EPI).
The good news is that lawmakers have designed way better ways of helping working families. EPI and other experts on work and wages have put forth many ways to better help working families, from eliminating the sub-minimum wage that allows workers who receive tips to be paid a paltry $2.13 an hour, to raising all minimum wages above the $7.25 where it has been mired for a decade and a half, to making it easier for workers to unionize. In terms of tax solutions, lawmakers rightfully concerned about low-wage workers should instead consider expanding the Child Tax Credit and Earned Income Tax Credit (and especially making the latter stronger for workers without children in the home).
While the next President faces a wide range of pressing tax policy choices to make — from the expiration of much of 2017’s Trump tax law to international corporate taxation and beyond — a relatively silly idea has become the tax focus on the campaign trail: exempting tips from taxes. Despite its embrace by the candidates from both major parties, this policy idea would do little to help the roughly 4 million people who work in tipped occupations while creating a host of problems.
Exempting tips from taxes isn’t a new idea. It’s been proposed before and always abandoned because it’s practically impossible to do without creating new avenues for tax avoidance.
Lower-paid service employees definitely deserve support. However, altering the tax code in this manner is a very leaky way of achieving that. It’s an approach that rich people with accountants and lawyers would surely be able to abuse. Fund managers, attorneys, and other high-paid professionals could easily reclassify their fees — or at the very least, some percentage of them — as mandatory tips for performance.
This proposal treats households with similar levels of income differently based on profession. Servers and bartenders, for example, receive a large portion of their income through tips and thus would receive a large tax exemption. Teaching assistants or health care workers might receive similar overall income but would not receive the same exemption.
Finally, these proposals create incentives to drive even more low-paid service employees into the tipped worker category, harming many workers and their families. Tipped workers have more unstable incomes than non-tipped workers, are more likely to live in poverty, and are more vulnerable to wage theft, according to the Economic Policy Institute (EPI).
The good news is that lawmakers have designed way better ways of helping working families. EPI and other experts on work and wages have put forth many ways to better help working families, from eliminating the sub-minimum wage that allows workers who receive tips to be paid a paltry $2.13 an hour, to raising all minimum wages above the $7.25 where it has been mired for a decade and a half, to making it easier for workers to unionize. In terms of tax solutions, lawmakers rightfully concerned about low-wage workers should instead consider expanding the Child Tax Credit and Earned Income Tax Credit (and especially making the latter stronger for workers without children in the home).