• About Us
  • Blog
  • FAQs
  • Support/Contact
LIQUORexam.com Blogs

Trump's Plan to Scrap Taxes on Tips: What It Means for Hospitality Workers

June 17, 2024

In a recent development that has generated considerable attention, former President Donald Trump has proposed eliminating taxes on tipped wages if he is re-elected. This announcement was made during a rally in Las Vegas, a city heavily reliant on the hospitality and service industry. The proposal aims to benefit workers who earn a significant portion of their income through tips, such as hotel and restaurant employees.

Key Points from the Proposal

During the rally, Trump stated, “When I get into office, we're not going to charge taxes on tips—people making tips.” This marks the first time Trump has mentioned changing tax laws specifically to benefit tipped workers. He emphasized that taxing tips has been a contentious issue for years and that service workers deserve this tax relief.

Trump did not provide detailed policy specifics during the rally, and representatives from his campaign did not immediately respond to requests for further clarification. However, he asserted that the change would be implemented “right away” if he takes office.

How Are Tips Currently Taxed?

Under current federal law, any tips totaling more than $20 in a month are subject to federal income taxes. Tips received through electronic payments are automatically reported to employers, while employees are expected to report their cash tips on individual income tax returns. The IRS estimates that it receives 99% of owed taxes on regular wages but only 55% on tips, due to underreporting.

Impact on the Hospitality Industry

Las Vegas, where Trump announced his plan, is a prime example of a city where many workers depend on tips. The leisure and hospitality sector accounts for 26% of total employment in Nevada as of January 2023. This includes jobs in hotels, restaurants, bars, and entertainment venues, where tips are a crucial part of employees' income.

In Nevada, a new minimum wage of $12 per hour for all employees, regardless of whether they receive tips, will be implemented on July 1. However, this standard is not uniform across the United States. In states like Texas, North Carolina, and Utah, tipped workers can legally be paid as little as $2.13 per hour, provided their tips bring their earnings up to the minimum wage. If tips fall short, employers are required to make up the difference.

Historical Context and Similar Proposals

Trump’s claim that this issue has “never been brought up before” is not entirely accurate. Former Congressman Ron Paul proposed a similar plan in 2012, aiming to abolish federal taxes on tips. Paul argued that tipped workers were overtaxed and pledged to eliminate these taxes entirely if elected.

Trump’s proposal to eliminate taxes on tips could provide significant financial relief to millions of hospitality workers who rely on tips to supplement their income. This policy change, if implemented, would address a long-standing issue within the service industry, potentially boosting the earnings of many low-wage workers.

At LIQUORexam.com, we are committed to supporting hospitality workers through comprehensive training and certification. We will continue to monitor this proposal and its implications for the industry, providing updates as more information becomes available.

For more details, you can read the full article on Forbes here.