Moments of bipartisan agreement can be hard to come by in contemporary American politics. Yet, surprisingly, on one issue, Donald Trump and Kamala Harris agree: no taxes on tips. This may come as a relief for workers desperate for a helping hand, as more than 60 percent of middle-class Americans say they’re struggling financially. But as appealing as this policy may be on the surface, it is nonetheless a bad idea. It neglects the overwhelming majority of workers, and it’s incredibly prone to abuse.
At first glance, the idea of giving a break to tipped workers is attractive — service workers are disproportionately women and people of color, and reducing their financial burdens would be a step toward economic equality. But upon deeper inspection, this policy is both ineffective and problematic. It’s true that tipped workers often earn very low incomes, but that also means that they pay little to no income tax. In 2022, Yale Budget Lab found that roughly 37 percent of tipped workers made so little money they paid no federal income tax at all. Furthermore, by distinguishing tips from income, the policy could cause tax-paying workers to lose out on vital programs, such as the Earned Income Tax Credit, which provides substantial financial support for low-income workers and families.
A no tax on tips policy could also end up helping employers and harming consumers instead. The federal subminimum wage stipulates that employers must pay tipped workers at least $2.13 per hour, but if workers don’t earn enough in tips to reach the federal minimum wage of $7.25 per hour, the employer must pay the difference. A tax break would reduce the pressure on employers to raise wages, and transfer the burden of paying employees onto consumers’ shoulders. Such a bill could incentivize other industries to adopt a tipping model as well; this, in turn, would lead to increased pressure on workers to solicit tips, potentially leading to unstable income streams. Such a shift would be unwelcome in a culture where tipping is already unpopular: nearly 60 percent of Americans view tipping culture negatively, according to a recent BankRate survey.
Finally, the no-taxes-on-tips principle unfairly and arbitrarily distinguishes tipped and non-tipped workers. Why should a cashier or janitor be taxed differently from a server or barista? And if tips are considered voluntary gifts rather than income, how can we justify paying a wage of just $2.13 an hour? Less than 3 percent of American workers are tipped anyways — including just 5 percent of low-income workers — and such a policy would keep many tipped workers from accessing important social services while simultaneously initiating a two-tiered tipping system that leaves out the overwhelming majority of workers.
It is fundamentally misguided to address income inequality through tax cuts. Though tax cuts may seem enticing to a struggling working class, in reality the benefits they provide are often short-lived and disproportionately favor the wealthy. True solutions to wealth inequality come from raising the minimum wage and offering support services to help low-income families stay afloat — not frivolous tax breaks.
Kamala Harris’ groundbreaking economic agenda already features several of these policies. Many of her provisions, including a federal minimum wage increase and a tax credit for parents of newborns, could actually benefit a broad section of American workers. She shouldn’t pander to hollow policy solutions that do little to help the American public.
At the Coop Fountain last year, we saw what happens to workers when they’re left unprotected. Labor groups like UNITE HERE! Local 11 have already made important strides in promoting better working conditions and securing livable wages for Pomona’s workers. Government policies should support these efforts to enhance protections for workers, rather than leaving them more vulnerable.
Adopting a no-tax-on-tips policy may be politically savvy, especially in key battleground states like Nevada, where tipped service workers make up a significant portion of the population. But as we enter into the final weeks of the election, it’s critical that voters discern between rhetoric and substance, and hold politicians accountable for crafting approaches that deliver real results.
Eric Lu PO ’28 is a Politics major from Salt Lake City, Utah. As a prospective Politics Major and former part-time service worker, he is passionate about implementing policies that protect workers’ rights.
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