‘No Taxes on Tips’ Would Help Almost No Low-Wage Workers & Is Open To Abuse By the Rich; Low-Wage Workers Really Need Better Wages & A Voice on the Job
Workers shouldn’t be distracted by tax proposals like “No Taxes on Tips,” when what would really help low-wage workers is higher wages, a voice on the job, and investments in making child care more affordable and offering paid leave. And they need real reforms to our tax code, which after decades of lobbying by the rich and big corporations is currently rigged to favor the wealthiest.
Over 95% of Low and Moderate Wage Workers Don’t Get Tips And Would Get No Benefit from The Plan
Fewer than 5% of workers making less than $25 an hour – the low and moderate wage workforce the proposal is presumably meant to help – get tips. Even among that group, one-third don’t make enough to owe federal income taxes anyway. (Neither Trump nor the GOP party platform indicate which taxes they mean to exempt tips from, but the legislation introduced by Republicans in Congress specifies it is only the federal income tax, not payroll taxes.) So almost no low and moderate wage workers would see any benefit from this proposal even as it distracts from real solutions to underpaid employees.
Low-Wage Workers Have Made the Demand Clear: Higher Wages & A Voice on the Job
Abolishing the sub-minimum wage paid to tipped workers in many states and enacting the “Raise the Wage Act” which would raise the minimum wage to $17 an hour would be the quickest and easiest way of raising low-paid worker income. Making it easier for workers to exercise their right to organize and join a union would also be a more effective way to boost their pay, as union workers earn as much as 20 percent more than their non-union counterparts. Congress should consider legislation like the PRO Act to encourage collective bargaining. Another proven method is expanding the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). That would increase the take-home pay of all low-wage workers, not just the 3% or so addressed by not taxing tips.
High-Salaried Executives Would Call Their Wages Tips to Dodge Millions in Taxes
While the average service worker would see little to no benefit from this proposal, high-priced CEOs, money managers, lawyers, and other professionals could dodge millions of dollars in taxes by simply re-labeling their fees as “tips.” The Republican plan introduced in the House would do nothing to prevent this kind of gaming of the system by the nation’s highest-paid employees, the same ones that most previous Republican-led tax proposals have specifically set out to help.
Politicians Originally Proposing This Idea Want to Give Huge Tax Cuts To The Rich That Hurt Workers
Trump and the GOP, who initially proposed this idea, also want to permanently extend their 2017 tax cuts that mostly benefit the rich at a 10-year cost of $5 trillion. They’ll then use the resulting jump in the deficit and national debt to try to cut Social Security, Medicare, Medicaid, housing education and other services workers count on. For example, in 2023, House Republicans proposed legislation that would kick 300,000 children out of child care and Head Start, slash nutrition services for more than 1 million seniors, and make healthcare more expensive and less accessible for 2 million vulnerable people who rely on community health centers.
For more information, see One Fair Wage, or Center for American Progress