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taxes
This Tax Season Proved 'No Tax on Tips' Was Never for Workers
Cutting taxes on some tips for some workers is not a solution. Raising wages—and ending the subminimum wage—is.
Apr 18, 2026
During the election, Donald Trump boasted about lowering taxes for working Americans with his “no tax on tips” plan. This tax season, millions of Americans found out it was a scam.
You have to earn money for tax cuts to affect you. A tax deduction only helps if you owe taxes—and most tipped workers earn so little that they barely do. Two-thirds of tipped workers will not even earn enough to benefit. Zero minus zero is still zero. The vast majority of these tax cuts go to the wealthiest taxpayers.
For the workers this policy was supposed to help, the results are already clear.
Take Sherie Cummings, who has poured drinks on the Las Vegas Strip for 20 years. Sherie and her husband, also a bartender, earned $60,000 in tips last year. They expected the full deduction the president promised. They got $25,000 of it. The cap.
Thirteen million tipped workers do not need a tax deduction. They need a raise.
For private jet buyers, the same law delivered something different. Full write-offs on aircraft worth $5 to $10 million. And that write-off is permanent. The tips deduction expires in 2028. The Tax Policy Center projects that 60% of the savings from this law will flow to the top fifth of households—those earning more than $217,000 a year. The wealthiest will save millions. Sherie Cummings is putting her refund into savings because she is afraid of what comes next.
For working people, the real problem was never the tax code. It is wages. The federal subminimum wage for tipped workers has been $2.13 an hour since 1991. It was locked there permanently in 1996 by the National Restaurant Association—what we call “the other NRA.” They spent $2.9 million on federal lobbying in 2020 alone to make sure it stayed there. Which is why tipped workers earn a median income of $15,198 a year. Thirty-seven percent of the national median. Which is why they rely on food stamps at nearly double the rate of other workers. And because workers depend on tips from customers to survive, they put up with what no one should have to. Seventy-one percent of women in the industry report sexual harassment. In subminimum wage states, the rate is double what it is in states that require a full minimum wage with tips on top.
Seven states already require a full minimum wage with tips on top: California, Oregon, Washington, Nevada, Minnesota, Montana, Alaska. It is called One Fair Wage. The restaurant lobby warns that tips would disappear, that restaurants would close, that jobs would vanish. These are scare tactics. The seven states prove them wrong. Tips are the same or higher. Restaurant employment grows faster. Small business growth rates match or beat subminimum wage states.
And restaurant workers have organized and fought for years and won One Fair Wage in Washington, DC, Chicago, and Michigan. The restaurant lobby has fought to block and roll back these wins—in Michigan, they are still trying. But workers keep going. And even where implementation is partial, the numbers are in. DC set an all-time restaurant employment record. Tips grew. Chicago saw more than 850 new restaurant licenses and the fastest pay growth in the country.
Cutting taxes on some tips for some workers is not a solution. Raising wages—and ending the subminimum wage—is. That is why more than 100 labor, community, and civil rights organizations have come together as the Living Wage For All coalition. The fight: Raise the minimum wage to meet the cost of living and end all subminimum wages. In every state. For every worker. Campaigns are active in eight states. Workers have already won. And they will keep winning.
Thirteen million tipped workers do not need a tax deduction. They need a raise. Every shift. Every paycheck. Every year.
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America Needs To Tax Its Own 'Second Estate': Billionaires
The United States has no nobility, according to our Constitution. But our tax code does protect the very rich.
Dec 04, 2025
Pre-revolutionary French aristocrats—the “Second Estate”—didn’t pay taxes. Amazingly, America too has a second estate, billionaires who pay virtually no taxes. In her very outstanding recent book, law professor Ray D. Madoff shows how they get away with this.
The United States has no nobility, according to our Constitution. But our tax code does protect the very rich.
Federal taxes on income and estates—intended to fund government and prevent development of a hereditary financial aristocracy—were enacted early in the 20th century and originally worked well.
But since about 1980, the estate tax—infested with loopholes—has been nearly abolished for practical purposes and now produces trivial income.
Madoff wants to get rid of the ability of ultra-rich people—billionaires—to avoid having any taxable income in the first place.
Madoff suggests that the estate tax should be completely eliminated because its existence deceives the public about what is really going on. People falsely think that billionaires who pay no federal income tax will at least pay the estate tax when they die. In fact, they are paying neither kind of tax.
Billionaires avoid the income tax by arranging to have no taxable income.
Before 1982 ultra-rich people could not avoid paying income tax. Their income consisted of dividends and capital gains harvested by selling shares of stock, the price of which had increased. Dividends and capital gains are taxable income.
But in 1982 federal regulators weakened a rule prohibiting corporations from buying back their own stock. Since then, many corporations have used profits to buy back stock shares instead of issuing dividends. With fewer shares of stock outstanding and the value of the corporation increasing, the value of each share of stock began increasing dramatically.
What used to be taxable dividends turned into large capital gains benefiting the stock owners, including very rich ones. If shareholders need cash and sell appreciated stock, of course they would owe income taxes on the capital gains (selling price of the stock minus how much the shares cost them). But capital gains are taxed at a much lower rate than normal income like salaries, bank interest, and returns on bonds.
As Madoff points out, however, billionaires need not sell any stock to get cash to live on. Instead, they can borrow the money, using their stock as collateral. Borrowed money is not taxable income, so they owe no tax while living extravagantly.
And when they die, the stock they bequest to their heirs gets a stepped up “basis,” so if their heirs sell the stock they will owe no taxes because the stepped up basis leaves no taxable capital gains.
And inherited money is not considered taxable income. Someone who earns $50,000 pays significant income (and payroll) taxes on it, while someone who inherits $1 billion pays no income or payroll tax on it.
Madoff rightly objects to this situation, but she is not arguing that we should “soak the rich” with higher income tax rates at the top. She points out that there are two kinds of “rich” people. One is the working rich, skilled professionals earning high salaries and, usually, already paying very high taxes. A high percentage of all income tax receipts come from these people.
Increasing the high tax rates these “rich” people are already paying would produce insignificant extra revenue for the government.
Instead, Madoff wants to get rid of the ability of ultra-rich people—billionaires—to avoid having any taxable income in the first place. She wouldn’t tax them while they are alive, but would tax whoever inherits from them.
Rather than trying to fix the estate tax, Madoff would abolish it, eliminate the stepped up basis for inherited stock, and make inherited money and other gifts received taxable income for the recipients.
Assuming an exemption for small gifts (to allow birthday presents and the like), this could be a reasonable reform. It would bring in very large amounts of taxes while reducing today’s extreme economic inequality.
For further details, see Ray D. Madoff, The Second Estate: How The Tax Code Made An American Aristocracy. This is one of the two best books I have read since retiring in 2000.
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After Lobbying Blitz, Trump IRS Formally Kills Direct File Program That Would've Saved Americans Billions
"It was never about efficiency, it's about Trump and his billionaire allies taking money from our pockets to make the tax system worse and line the pockets of big business elites in this predatory industry," said a spokesperson at Americans for Tax Fairness.
Aug 01, 2025
In a move backed by private tax-filing corporations, the administration of U.S. President Donald Trump officially announced the shut down of the government's free Direct File service this week.
For two years under the administration of former President Joe Biden, the IRS allowed taxpayers in some states to file their taxes online using public software under a pilot program.
A report published in March by the Economic Security Project found that:
At maturity in five years, Direct File would save the average user $160 in filing fees and hours of their time each year, which saves Americans a total of $11 billion annually between filing fees and time costs. By breaking down barriers to filing, Direct File would also deliver up to $12 billion each year in additional tax credits to low-income families currently missing out.
In January, the direct file system was rolled out to 30 million Americans across 25 states, to rave reviews. According to a memo circulated within the Internal Revenue Service (IRS), the program was "beloved by its users," with a 94% satisfaction rate among those who used it.
But according to IRS Chairman Billy Long, who spoke at a tax summit Monday, it will not be made available again in 2026.
"You've heard of direct file, that's gone," Long gloated. "Big beautiful Billy wiped that out."
"I don't care about Direct File. I care about direct audit," he added, referring to his efforts to make it easier for businesses and individuals under tax audits to get updates on their status.
The budget legislation that Trump signed into law last month did not formally end Direct File, as Long suggested. However, it did allocate $15 million to the Treasury Department for a task force to study public-private partnership alternatives to replace Direct File. "Big beautiful Billy" likely referred to Long himself, whose IRS formally ended the program.
Long's announcement was the culmination of a months-long scheme by private tax-filing corporations like Intuit and H&R Block, and Republicans in government to kill Direct File.
As early as December, following Trump's reelection victory, GOP congresspeople began calling for the program's demise. Twenty-nine of them, who'd accepted a combined $1.8 million in campaign donations from the tax prep industry over their careers, signed onto a letter written by Reps. Adrian Smith (R-Neb.) and Chuck Edwards (R-N.C.) calling on Trump to issue a "day-one executive order" killing the program.
Long, himself a former congressman from Missouri, raised eyebrows in January 2025, shortly after he was named as Trump's nominee to lead the IRS. According to The Lever, he received a curious $137,000 worth of donations that he then used to pay himself back for a $130,000 loan he'd made to his failed 2022 campaign for the Senate. Around a third of the money came from tax consultancy firms.
In March, following mass layoffs at the IRS by Elon Musk's Department of Government Efficiency (DOGE), staff working on the Direct File system were told to halt their work. Prior to that, Musk wrote on his social media app X that he had "deleted" 18F, the government agency working on the project.
Right after tax day in April, The Associated Press first reported that the administration was planning to end the program.
While consumer advocacy groups called the change a "big loss" for the public, the American Coalition for Taxpayer Rights, an astroturf group backed by tax-filing companies, thanked Smith, Edwards, and other GOP congresspeople "for their leadership" calling for the termination of the program.
The program was effectively dead for months, but Long's gleeful coroner's report this week made it official.
"Last year, Direct File saved taxpayers $5.6 million in tax preparation costs by allowing people to file their taxes for FREE," wrote Rep. Alexandria Ocasio-Cortez (D-N.Y.) Friday on X. "That's why tax preparation companies like... Intuit lobbied to get rid of it. Trump just gave them their wish."
Despite claims by GOP congresspeople that the program was "wasteful," it actually saved taxpayers much more money than it cost. According to the Economic Security Project's study, "For every dollar invested in the program, Direct File delivers $106 in benefits to American taxpayers, between savings on tax preparation fees and access to untapped tax credits."
"This move exposes what's really happening in Trump's administration," said David Kass, the executive director of Americans for Tax Fairness. "It was never about efficiency, it's about Trump and his billionaire allies taking money from our pockets to make the tax system worse and line the pockets of big business elites in this predatory industry."
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