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"Call it what it is: a pay cut and a betrayal of the working people," said One Fair Wage.
With backing from the restaurant lobby, the Washington, D.C. city council voted Monday to gut plans to raise wages for tipped workers, which had already been approved by the public.
It's the second time the council has overturned a wage increase for tipped workers that the public voted for, having already done so once in 2018.
Under federal law, tipped workers are allowed to be paid a much lower minimum wage—just $2.13 per hour compared with $7.25 for nontipped workers. Tipped workers are, consequentially, more likely to live in poverty.
This is the case in Washington, D.C., where, according to data from the Bureau of Labor Statistics analyzed by the Economic Policy Institute, 7.7% of tipped workers live in poverty compared to 2.6% of nontipped workers.
In 2022, D.C. voters overwhelmingly voted to address this problem, supporting Initiative 82, which would have gradually raised the minimum wage for tipped workers—just over $5.35 an hour at the time—to match what other workers receive by 2027.
In 2022, D.C.'s standard minimum wage—which increases each year pegged to inflation—was $16.10. As of 2025, it has increased to $17.95.
As the initiative to raise the tipped minimum wage began, restaurant industry lobbying groups like the Restaurant Association of Metropolitan Washington (RAMW) fought tooth-and-nail to roll it back.
In Jacobin, Raeghn Draper wrote that this group, and others like it around the country, "claim to speak on behalf of restaurant workers, but they are not worker organizations."
Instead, Draper wrote, "They are extensions of the National Restaurant Association (NRA), an industry group historically aligned with large corporate chains like McDonald's, Taco Bell, and Olive Garden—none exactly known for their commitment to workers' rights or well-being."
These groups waged an aggressive disinformation campaign, claiming that by phasing out the subminimum wage, restaurants, crushed by their increasing operating costs, would be forced to close en masse.
The RAMW even touted a survey of its own member restaurants purporting to show that 44% of full-service casual restaurants would have no choice but to close their doors by the end of 2025 due to the policy.
As Draper points out, citing data from an independent investigation by D.C.'s Office of the Budget Director, "the number of D.C. restaurant closures in 2024 did rise slightly compared to the previous year, but restaurant openings also increased, outpacing closures by a margin of two to one."
A study by the EPI likewise found that—despite industry claims that the higher wage requirements were forcing restaurants to lay off their employees—D.C. was seeing more employment growth than other towns in the region without requirements to raise wages.
But media outlets uncritically reported the restaurant industry's narrative about mass closures, and their attempts to "manufacture a crisis," as Draper says, paid off.
While making public appearances with restaurant industry lobbyists, Democratic Mayor Muriel Bowser signed legislation halting the wage increases in June—freezing the tipped minimum wage at $10 an hour. She pushed for a full repeal, which would have knocked the tipped wage back down to $8 an hour. But the city council voted it down.
On Monday, despite fierce protests from workers and unions, the city council voted 7-5 to freeze the tipped wage at $10 until July 2026, when it will increase by a measly five cents. They also voted to dramatically slow the tipped wage increases to just 5% each year until 2034, when it will be capped at 75% of the standard minimum wage.
Members of the council, as well as many media outlets, including Axios and The Washington Post, described the decision as a "compromise" between employers and workers. RAMW, which lamented that it was "not a full repeal," has portrayed it that way, though it nevertheless described it as a "win for the industry."
Fair wage activists, however, described it not as a compromise, but an assault on a hard-won democratic victory.
"In what world is this a compromise?" asked One Fair Wage, one of the groups that campaigned for the initiative. "Call it what it is: a pay cut and a betrayal of the working people."
"D.C. Council just voted to overturn the will of the people and freeze wages for tipped workers," said the Fair Budget Coalition in a post on X following the vote. "As rents and other costs rise, it is a CHOICE to maintain a subminimum wage for struggling D.C. residents."
According to EPI, a person living in Washington, D.C. needs to earn just under $31 an hour to afford the cost of living. The average wage paid to tipped workers like bartenders, waiters, and waitresses falls several dollars short of this.
"The voters told us what they wanted when they voted overwhelmingly for I-82—twice—and this is not it," said Brianne Nadeau, one of the council members who voted against reversing the wage hikes. "Restaurant workers and the organizations that represent them have been fighting this battle for wage protections for years, and they shouldn't have to keep fighting it. And this council should not keep on telling the voters they don't know what's best for themselves."
"The council chose corporate lobbyists over tipped workers," said One Fair Wage. To the council members who voted for it, they said: "We see you. We won't forget."
Over the next 10 years, the Raise the Wage Act would have a total benefit to affected workers of $700 billion, compared with about $39 billion from “no tax on tips” in the House bill.
At President Donald Trump’s direction, Congress is considering proposals to exempt tips from taxable income.
After Trump floated this gimmick on the campaign trail, Republican and Democratic elected officials alike have embraced the idea. The House Republican budget bill (H.R. 1) includes a “no tax on tips” provision that gives the illusion of helping lower-income workers—while the rest of the legislation hands huge giveaways to the rich at the expense of the working class. The Senate recently passed a standalone version of no tax on tips that similarly provides the false impression of aiding workers while giving employers excuses to incentivize tipped work and keep base wages low.
In stark contrast to “no tax on tips,” which excludes workers with the lowest incomes, the largest benefits of the Raise the Wage Act would go to the lowest-paid workers.
If the Trump administration and its allies in Congress genuinely wanted to help tipped and lower-paid workers, there are far better options they could pursue, like raising the federal minimum wage. To illustrate this, we compare the estimated impact of no tax on tips with the Raise the Wage Act of 2025, a bill that would raise the federal minimum wage from $7.25 to $17 an hour by 2030 and gradually phase out the tipped minimum wage. Here is an overview of how the two plans compare.
No tax on tips: Between 2.5 and 5.2 million tipped workers would receive an income tax deduction over the next four years, but benefits would end after 2028.
The Raise the Wage Act: Nearly 23 million workers, including 2.8 million tipped workers, would earn higher wages with no end date—meaning affected workers would continue to benefit indefinitely.
No tax on tips: Eligible tipped workers would receive an average annual tax cut of $1,700 for the four years it would be in effect. However, the benefits would heavily skew toward higher-income tipped workers. Among all tipped workers, the top 20% would receive an average tax cut of $5,768 while those in the bottom 20% would only get $74 on average. The average for the bottom quintile is small in large part because two-thirds of those workers have incomes so low that they do not pay federal income taxes and thus will not see any tax benefit.
The Raise the Wage Act: Affected workers who work year-round would receive an average wage increase of $3,200 per year. After taxes, the net pay increase would be marginally smaller but still significantly larger than what a worker would receive on average with a tax deduction on tips. In stark contrast to “no tax on tips,” which excludes workers with the lowest incomes, the largest benefits of the Raise the Wage Act would go to the lowest-paid workers.
No tax on tips: The public writ large would pay. House Republican lawmakers are already proposing massive cuts to social programs, such as Medicaid and food stamps that benefit millions of people (including tipped workers), to offset foregone revenue from no tax on tips and large tax cuts for the rich. The Republican plan would also dramatically increase the federal debt, which could substantially raise borrowing costs for households and businesses in the future.
The Raise the Wage Act: Employers of low-wage workers would pay for these wage increases, absorbing the higher labor costs over time through a variety of channels. Importantly, the Raise the Wage Act not only increases the federal minimum wage but also phases out the tipped minimum wage, a system that has provided employers of tipped workers an enormous—and highly problematic—public subsidy for decades.
While no tax on tips would benefit only the small share of workers who receive tips as a portion of their compensation, the Raise the Wage Act would benefit all low-wage workers in the U.S., including 4.2 million people with incomes below the poverty line. Over the next 10 years, the Raise the Wage Act would have a total benefit to affected workers of $700 billion, compared with about $39 billion from “no tax on tips” in the House bill (see Figure A).
As we at Economic Policy Institute and others have noted, no tax on tips is problematic for a variety of other reasons, aside from its paltry and poorly targeted benefits. The measure that passed in the House caps eligibility to workers in certain tipped occupations earning less than $160,000 in annual income. This will mitigate tax avoidance by the highest earners, but it does not fix other problems, including the fact that ending taxation of tips would likely expand employer use of tipped work—a system already rife with discrimination and worker abuse. No tax on tips would also undercut efforts to raise worker compensation while depleting tax revenue for public services. By subsidizing the use of tipping in the federal tax code, no tax on tips would further cement a system that lets employers off the hook from paying their workers a fair wage—in this case, forcing taxpayers to foot the bill. In contrast, the Raise the Wage Act gives workers a durable wage increase paid for by those who should be paying—their employers.
Beyond raising the minimum wage, there are several other effective and more equitable policies to support working families—including expanding the Earned Income Tax Credit and Child Tax Credit, providing workers with paid sick leave and paid family and medical leave, and supporting workers’ rights to form and join unions. But Trump and congressional Republicans, while claiming to support workers, have not pursued these policies. Instead, they have relentlessly attacked workers, and pushed an enormous tax cut for the wealthy—paid for by cutting essential social programs for low-income people and children and adding trillions to the public debt. As many as 16 million people would lose their health insurance under the House budget bill.
The Raise the Wage Act is by no means an outlier or a radical exercise in messaging—it’s cosponsored by majorities of House and Senate Democrats. If even a few Republicans were willing to support it, it could easily have the votes to pass. No tax on tips, on the other hand, remains a deceptive ploy that would provide few benefits to workers and fail to offset the harm the Republican budget bill would impose on millions of workers and families.
"Once again, Democrats have thrown working people under the bus, this time in Michigan," said one critic.
Economic justice advocates excoriated Michigan Gov. Gretchen Whitmer on Friday after the Democrat signed legislation that, while speeding up the state's increase to a $15 hour minimum wage, could leave tipped workers earning less than they would under a system imposed last year by the state Supreme Court, according to critics.
Whitmer signed a pair of bills changing the state's minimum wage, tip credit, and paid sick leave law following an eleventh-hour legislative compromise, explaining in a statement that "Michigan workers deserve fair wages and benefits so they can pay the bills and take care of their family, and small businesses need our support to keep creating good jobs."
Abigail Disney, a member of the group Patriotic Millionaires, said in a statement, "Once again, Democrats have thrown working people under the bus, this time in Michigan under the stewardship of Gov. Gretchen Whitmer."
"In its quest to rebrand itself and win back the working-class vote, Democrats needed to present a unified front in this pivotal moment in Michigan—and anything less than that, which this is, should be taken as an abysmal failure," Disney continued.
"This is the unfortunate but predictable outcome of a party that has proven itself over the years to be for sale to the highest bidder. Voters will definitely notice, and Democrats shouldn't expect them to forgive and forget at the polls in 2026 and beyond," she added.
In 2018, advocates drafted ballot initiatives aimed at expanding paid sick leave and raising the state minimum wage, which was then $9.25 an hour. But Republican state lawmakers moved to block the measures by maliciously adopting and then favorably amending them. Last July, Michigan's Supreme Court ruled this "adopt and amend" tactic unconstitutional and ordered the initial sick leave and minimum wage proposals to take affect at midnight on Friday.
By signing one of the bills, S.B. 8, Whitmer leaves in place a system in which tipped workers' minimum wage will be $4.74 instead of $6 under the court-ordered plan. Customer tips are counted upon to close the gap between the tipped and regular minimum wage of $12.48 per hour. Employers must pay the difference if workers don't reach that amount with tips.
While the Michigan Restaurant and Lodging Association welcomed Whitmer's move, John Driscoll, author of Pay the People! Why Fair Pay Is Good for Business and Great for America, said in a statement that "restaurant lobbyists in Michigan may say that they 'won' this battle in preserving the subminimum wage for tipped workers, but in the end, their efforts will only hurt themselves and their state's economy."
"I know from my own experience as the CEO and chair of businesses that pay people stable and fair wages that doing so is best for workers, businesses, and the broader economy," he continued. "When workers have economic security, they are more loyal and productive, which will help businesses and stimulate growth."
"Contrary to what restaurant associations may claim, everybody lost today when Gov. Whitmer signed S.B. 8 into law," Driscoll added. "Tipped workers lost. Businesses lost. And the Democrats lost too when they sacrificed the most vulnerable workers in Michigan to lobbyists."
The advocacy group One Fair Wage accused the governor of "stripping millions of dollars" from Michigan workers' paychecks.
"Michigan's highest court ruled that these wage increases should take effect," One Fair Wage president Saru Jayaraman said in a statement. "Michigan workers have already earned this raise, and taking it away is not a compromise—it is wage theft. We are mobilizing to ensure voters—not politicians—have the final say on whether these protections remain in place."
One Fair Wage said: "If enough valid signatures are collected, S.B. 8 will be blocked from implementation, and the 2024 Michigan Supreme Court decision requiring that all workers receive a raise to $15 an hour with tips on top will go into effect. The referendum will thus ensure that Michigan voters—not politicians—decide whether these wage increases stand."
One Fair Wage must gather 223,099 valid signatures to suspend S.B. 8 and leave the matter up to Michigan voters.
Meanwhile, the federal tipped minimum wage remains stuck at $2.13 an hour, where it's been since 1991. The federal minimum wage has been $7.25 since 2009.