Harris Backs Trump Proposal on Ending Taxes on Tips

By Akayla Gardner
Bloomberg News
(TNS)

Vice President Kamala Harris said she would seek to end taxes on tipped income for service industry workers—matching a proposal that her 2024 rival Republican Donald Trump has also made in a bid to court young people and working-class voters.

“When I am president, we will continue our fight for working families of America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers,” Harris said at a rally Saturday in Las Vegas.

The Democratic nominee’s pledge came in a battleground state critical to determining November’s election outcome and where both parties are fighting to draw support from service-industry workers. Nevada’s casinos draw millions of tourists a year and the state has the highest proportion of food service and accommodation workers in the U.S.—employees who historically have relied on tips.

Trump made his pitch to remove taxes on tips during a rally in Las Vegas in June, part of an economic agenda that aims to renew expiring tax cuts. The former president assailed Harris in a post on his Truth Social network Saturday night, accusing her of stealing one of his proposals.

Harris “just copied my NO TAXES ON TIPS Policy. The difference is, she won’t do it, she just wants it for Political Purposes!” Trump wrote. “She has no ideas, she can only steal from me.”

Ending taxes on tips would require legislation, according to a Harris campaign official who detailed the proposal on condition of anonymity. Harris, if elected president, would work with Congress to craft a proposal that includes an income limit and provisions that would ensure that workers such as lawyers or hedge fund managers could not take advantage of the policy, the official said.

The Culinary Union, a powerful organized-labor group in Nevada, endorsed Harris for president on Friday but previously has dismissed Trump’s proposal as “wild campaign promises.” Dozens of members attended Harris’ rally.

Exempting tipped wages from federal taxes offers to trim tax bills for the more than 6 million hospitality workers who reported a total of $38.3 billion in tipped income in 2018, the latest year for which Internal Revenue Service data are available. That averages out to about $6,250 per tipped worker.

Both of Nevada’s US senators, Democrats Jacky Rosen and Catherine Cortez Masto, have backed legislation to fully exempt tipped wages from federal income tax.

But the plan is not without controversy. Economists say it could incentivize workers and employers to shift more compensation from wages to tips and potentially keep some low-income households from accessing benefits like the child tax credit.

It’s also unclear whether Trump or Harris would apply their proposals to Social Security and Medicare taxes, which would make the budgetary impact bigger and potentially leave millions of workers with smaller benefits in retirement.

Harris’ proposal comes as she plans to begin rolling out elements of her economic agenda in the coming week, focusing at first on policies to reduce costs for American households. High inflation, which has vexed President Joe Biden’s administration and contributed to the poor marks voters give its handling of the economy, threatens to damage Harris’ election prospects.

— With assistance from Gregory Korte.

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