SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
economic policy institute
A Pro-Worker Tip for Harris: Don't Copy Trump's Faux No-Tax-On-Tips Sham
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.
Aug 20, 2024
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).
Keep ReadingShow Less
Little-Known Project 2025 Policy Would Tax Benefits for More Than 15 Million Workers
"Organized conservative constituencies for the corporate class got everything they wanted in the first Trump administration," wrote one economist. "There's no reason to expect this time to be different."
Aug 14, 2024
Project 2025, the right-wing policy blueprint spearheaded by the Heritage Foundation and co-authored by more than 100 former Trump administration staffers, has been denounced for several of its tax proposals, including slashing the corporate tax rate and the capital gains tax to benefit wealthy Americans—but a research group on Wednesday warned that one economic policy that hasn't gotten much attention could "greatly increase" financial hardships for millions of working families.
EPI Action, a nonpartisan research and advocacy organization affiliated with the Economic Policy Institute, published an analysis of a proposal that appears on page 7 of Project 2025's section on the Treasury Department—whose authors include at least two people who served on Republican presidential nominee Donald Trump's campaign and transition team for his term in office.
The proposal calls to tax employers on workplace benefits that exceed $12,000 per worker annually—which would undoubtedly "lead to employers cutting back on these benefits," wrote Josh Bivens, chief economist for EPI Action.
Based on health insurance benefits that are provided to more than 150 million Americans through their employers, Bivens found, more than 15 million workers would see their benefits taxed under the Project 2025 plan.
Those workers would collectively pay over $12 billion more in taxes if their employers shifted away from providing benefits as a cost-cutting measure.
"At best, employers would switch compensation away from tax-preferred benefits to taxable wages and salaries, increasing the taxes workers must pay. At worst, employers would simply cut back on benefits without offering an offsetting increase in wages and salaries."
Under the proposal, "at best, employers would switch compensation away from tax-preferred benefits to taxable wages and salaries, increasing the taxes workers must pay," wrote Bivens. "At worst, employers would simply cut back on benefits without offering an offsetting increase in wages and salaries."
The analysis explains that currently, all wages and other employee benefits can be deducted by employers when they calculate the taxes they owe, counting the wages and benefits as costs to the company. But under the policy, costs in excess of $12,000 would no longer be deductible—so "they will stop offering this compensation."
The policy would be liable to particularly cut into employer-sponsored health insurance, said Bivens:
Currently, roughly 13% of employee compensation in the United States takes the form of nonwage benefits provided by employers (not including mandatory contributions for social insurance like Social Security and Medicare or the value of paid leave). About two-thirds of this chunk of nonwage benefits is employer contributions to health insurance. Employer-provided health insurance is the dominant form of coverage in the United States, with over 150 million people receiving health insurance through employer plans (including dependents covered on another person's plan). If employers start being taxed on these benefits, they will become less and less likely to offer them going forward.
The proposal would be "damaging" for millions of families who rely on one working adult's employer-provided health insurance to cover dependents, such as children.
"If, for example, a two-earner household with young kids has one earner working part time to have more time for childcare, the part-time earner is highly unlikely to qualify for employer-provided insurance (which is usually made contingent by employers on working full time), and so this family must rely on the full-time earner having access to a family health insurance plan," wrote Bivens. "The Project 2025 plan would hence greatly increase hardship for such families."
Under the plan, employers would also be barred from deducting the cost of family health insurance plans that cover dependents over the age of 23—a clear attempt, according to Bivens, "to roll back one of the more popular parts of the Affordable Care Act (ACA), which allowed children to be covered on their parents' family health insurance plans until age 26."
Bivens emphasized that the proposal is not novel, but reflects "long-standing conservative policy efforts to reduce the generosity of health insurance plans."
The Republican Study Committee, the largest conservative caucus in the U.S. House of Representatives, called to tax employer-provided benefits in its budget proposal earlier this year.
"Trying to unravel employer-provided benefits and the public safety net for health insurance is not an idiosyncratic feature of Project 2025, it's a central goal of the conservative policymaking ecosystem," wrote Bivens.
And while Trump and his vice presidential candidate, Sen. JD Vance (R-Ohio), have attempted to distance themselves from Project 2025, Bivens noted that the Trump campaign has expressed "enthusiastic approval" of the policy agenda in meetings with the Heritage Foundation. As Common Dreams reported last week, Trump flew on a private jet with Heritage Foundation president Kevin Roberts in 2022.
"The candidates can claim Project 2025 has no influence on them, but organized conservative constituencies for the corporate class got everything they wanted in the first Trump administration," wrote Bivens. "There's no reason to expect this time to be different."
Whether the plan to tax employee benefits is enacted by a potential second Trump administration due to its inclusion in Project 2025 or as the result of "a long campaign by conservative policymakers to shift costs onto families" instead of employers, wrote Bivens, the outcome of the plan is clear: "U.S. workers will lose access to key family-sustaining benefits and face higher taxes."
Keep ReadingShow Less
Report Shows How Lawmakers in GOP-Dominated South Harm Workers
"It will be important for Southerners from all backgrounds," one expert wrote, "to stand together and build the coalitions needed to demand policymakers create a new economic development model."
Jul 18, 2024
"For at least the last 40 years, pay and job quality for workers across the South has been inferior compared to other regions—thanks to the racist and anti-worker Southern economic development model."
That's according to a Thursday report by Chandra Childers, a senior policy and economic analyst at the Economic Policy Institute (EPI). The new publication is part of her "Rooted in Racism and Economic Exploitation" series.
Previous documents in the series have discussed how "Southern politicians claim that 'business-friendly' policies lead to an abundance of jobs and economic prosperity" but in reality, their failed model is designed "to extract the labor of Black and brown Southerners as cheaply as possible" and has resulted in "economic underperformance."
"Because of the political opposition to unions, when workers try to organize, employers know that they can illegally intimidate them, refuse to recognize the union, or negotiate a contract in bad faith."
Thursday's report dives into various elements of the Southern economic development model, which "is characterized by low wages, limited regulations on businesses, a regressive tax system, subsidies that funnel tax dollars to the wealthy and corporations, a weak safety net, and staunchly anti-union policies and practices."
Childers uses a U.S. Census Bureau definition of the South, which includes: Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia, and the District of Columbia.
The EPI report highlights that "Southern states have lower median wages than other regions," "low-wage workers make up a larger share of the workforce across the South," and "every state that lacks a state minimum wage" is in the region.
The publication also points out the decline of coverage from employer-provided health insurance and pensions in the South, as well as how workers there "have less access to paid leave than their peers in other regions" and "Southern state lawmakers have also disempowered local communities."
"Across the South, most states have passed so-called right-to-work laws, with the exceptions of Delaware, Maryland, and the District of Columbia," Childers detailed. "Right-to-work laws do not, in any way, guarantee workers will have access to a job if they want one. They simply make it harder for unions to be financially sustainable."
"In addition to right-to-work laws and the overall opposition from political leaders across the region, workers seeking to organize a union typically face intense opposition from employers," she continued. "Further, because of the political opposition to unions, when workers try to organize, employers know that they can illegally intimidate them, refuse to recognize the union, or negotiate a contract in bad faith—with little to no fear of being held accountable by political leaders."
While "there are city and county officials who support higher minimum wages and access to pensions and paid leave for workers" in the South, she explained, their ability to take action is limited by preemption, which "is when state policymakers either block a local ordinance or dismantle an existing ordinance" intended to help the working class.
Childers' report doesn't explicitly point fingers at particular political parties, but the region has been largely dominated by Republican officials during the past four decades covered by the analysis.
While the Republican presidential campaign of former President Donald Trump is clearly making a play for working-class voters by selecting Sen. JD Vance (R-Ohio) as the vice presidential candidate and inviting International Brotherhood of Teamsters general president Sean O'Brien to speak at this week's convention—provoking criticism from progressive politicians and labor leaders—Southern GOP leaders continue to display disdain toward efforts to organize workers.
As Volkswagen employees in Tennessee began voting on whether to join the United Auto Workers in April, six Southern GOP governors put out a joint statement saying they were "highly concerned about the unionization campaign driven by misinformation and scare tactics that the UAW has brought into our states."
EPI said at the time that the governors' anti-union statement "clearly shows how scared they are that workers organizing with UAW to improve jobs and wages will upend the highly unequal, failed anti-worker economic development model of Southern states."
The Chattanooga vote was a success, but the following month organizers faced a tough loss at a pair of Mercedes-Benz plants in Alabama, where the UAW is now seeking a new election. Meanwhile, regional GOP policymakers have ramped up attacks on unions, advancing legislation that makes organizing harder.
"To begin to work toward changing the Southern economic development model," Childers argued, "it will be important for Southerners from all backgrounds—across race, ethnicity, gender, immigrant statuses, and income levels—to stand together and build the coalitions needed to demand policymakers create a new economic development model."
The expert urged people across the South to fight for a model that includes a living wage, guaranteed health insurance, pensions, and paid leave.
"Finally, and perhaps most important, workers must be able to come together in a union to demand fair wages and benefits, a safe working environment, and the ability to have a say about their workplace—even when politicians are intransigent," she stressed. "This is a model that would serve the interests of all Southerners."
Keep ReadingShow Less
Most Popular