Former President Donald Trump’s plan to end taxes on tips could “cost” the federal government $150 billion to $250 billion in taxes over 10 years, according to the mainstream media’s interpretation of a report by the Committee for a Responsible Federal Budget.
Put another way, the plan would actually save these workers $150 billion to $250 billion over a decade, money that could be used to pay for car repairs, rent, and child care.
“We estimate exempting all tip income from federal income and payroll taxes would reduce federal revenues by $150 to $250 billion over ten years on a static basis and could reduce revenue significantly more once behavioral effects are incorporated,” the committee wrote in its report on Sunday.
Last week in Nevada, Trump told a crowd of supporters, “When I get to office, we are not going to charge taxes on tips.”
Trump has since encouraged supporters to follow the example of Kid Rock and write “no tax on tips” on their restaurant receipts to help spread the word.
“No tax on tips, okay? It’s done. Done. And we need to spread the word so that every time you leave a tip for the next five months, you put on the receipt, vote for Trump, because there’s no tax on tips,” Trump said during his birthday party last week at Mar-a-Lago.
Over the weekend, Trump reiterated the idea: “I have announced that I will eliminate taxes on gifts for restaurant workers and hospitality workers. And anyone else who relies on tips, no more taxes on tips! None,” he said at the People’s Convention put on by Turning Point USA in Detroit.
To estimate the value of the policy in terms of tax burden, the Committee for a Responsible Budget reviewed historic IRS data which showed reported tip income totaled $26 billion (0.16 percent of GDP) in Tax Year (TY) 2012 and more than $38 billion (0.19 percent of GDP) in TY 2018.
Depending on how quickly tip income has grown since then and will continue to grow going forward, the organization estimates total tip income is likely to be between $700 billion and $900 billion from FY 2026 through FY 2035.
Read the Committee for a Responsible Federal Budget analysis at this link.
A tip is a gift. Gifts are not taxable (unless they are huge).
That only works if employees are paid the same minimum wage as everyone else. Often the minimum wage is lower for tipped employees in many states as it is considered part of their income. The tip should then only go to the employee receiving it, no tip pooling.
Where do you find the “huge” provision in the IRS Code? And how does the code define “huge?”
Wayne google is your friend!
The gift tax exclusion for 2024 is $18,000 per IRS website.
even then the gift is not taxable. The gift tax return or form 709 is for any gift exceeding that $18,000 amount and is used by the IRS to track your lifetime gifting amount.
Once you exceed $13.61 Million in gifting by someone or ones estate do those gifts become taxable
Very interesting. I could pay an employee $18,000 less wages and give it to them as a gift to avoid taxes?
I guess you could, but that would not be a tax deductible expense as gifts over $50 are not considered business expenses.
In reality, you would not pay the social security or Medicare taxes on that $18000 gift, but you would also have $18000 in additional income that would be subject self employment tax as only gifts can be from one individual to another. A company/partnership/corporation cannot claim the gift tax exclusion.
Would it be worth it? Maybe, but that depends on your individual tax rate and how well your business is doing.
If you are thinking of doing that, you should consult a CPA or have a discussion with your bookkeeper.
In Alaska the minimum wage is $11.73 for every job including tipped positions. Since many other minimum wage jobs aren’t allowed to receive tips maybe restaurant employees shouldn’t be tipped either. I won’t be tipping any longer at restaurants if minimum wage goes up to high. Tip pooling is a fair way to compensate all the workers in a restaurant. Why should just the wait staff and bartenders be the only ones recurving a tip? The bus staff and food expeditors can make a server look real good.
Where do you find the “huge” provision in the IRS Code? And how does the code define “huge.”
Notice that the first reaction is as always, how the government will “Suffer” the loss. The intent of the suffering is that the government really believes they know how to spend those “lost” funds better than the person who generated the funds in the first place.
Trump’s proposed tariffs would add $1500/yr to the average family. Everything he does benefits himself and the wealthy. His supporters are duped by his support for white privilege
You are so wrong, where do you come up with cr–?
Frank, it appears you believe only white people earn tips. You are mistaken in that belief.
Frank.
Trump is the only president that has done things that actually saved me money. You attempt to gaslight me into thinking that he will cost me more when the reality is just the opposite. Please stop lying to us. Keep your conspiracy theories to yourself and go hang out with the flat earthers where you belong.
Also, keep your racism to yourself as well. I will no longer be shamed for being white. I have worked honestly for every thing that I have.
I’ll take WHAT IS A CULT for two hundred Bob.
Good Grief Elizabeth, if you have to be obnoxiously intolerant, at least get the quote right. The best known Jeopardy hosts are Alex Trebek (who passed away) and current host Ken Jennings. You must be thinking of the Price is Right and Bob Barker hasn’t done that in years either.
Sure.. you just want taxes that are not avoidable. You can choose not to do business subject to tariff. You can’t decide not to get paid!!
Frank, I’m a “Blackman”, and I really, like really, like Trump. Is that support for “white privilege? And while your splainin please splain us all about this “white privilege” boogeyman. My sister never been married, got three kids, never had a job, is in good health and the govmint give her every damn thing she need. Is that “white privilege”? Or maybe, just maybe, could it be “ black privilege”? How about it Frank, huh?
DJT will bankrupt America just like it is one of his businesses. Trump’s philosophy is to increase Federal Spending + lowering taxes = increased deficient which means increased US National Debt.
Alaskkans for Freedom, are you suggesting Biden does not engage in deficit spending?
Not at all, but he would like to return taxes on large corporations and millionaires to previous levels. The GOP is the borrow and spend party, and the Democrats are the tax and spend party. Under the Trump tax cuts we were told that they would pay for themselves, instead it increased the nation debt by $7 Trillion dollars.
That’s hilarious. America Inc. has long been on its way towards bankruptcy long before Trump. I am quite tired of working to pay for debts that our government has accrued without my consent. The government has made the debt, not me. The government is responsible for paying its debt. Not me.
People like you and Frank Rast need to get bent. Boot lickers are a scourge to a free society and I am quite frankly done with paying for your way of life. Get a job!
Already have one, have had one since I was 15. I’ve never taken a dime from the government with the exception of the covid check signed by DJT. Even then it wasn’t the full amount since my income was above the level he set. If you don’t like taxes I suggest maybe trying another country. Personally I would love to stop subsidizing the corporations in this country but that doesn’t seem to be of any interest to Congress. I also like a military to defend this country, roads, airports, etc.
Our military seems to defend (or interfere with) other countries more so than ours.
The military cannot operate on US soil due to the Posse Comitatus Act signed by Rutherford B Hayes in 1878.
That act explicitly states that the US military, any and all branches. cannot enforce domestic policy within the United States.
It all started after the Civil War when President Hayes ended the Great Railroad Strike of 1877 by using Army troops.
Currently, unless authorized by Congress, the military cannot enforce domestic policy in the United States.
That doesn’t mean that they cannot assist in the event of a natural disaster or under certain circumstances. See George Floyd protests and in Arkansas during the desegregation of schools.
“The government has made the debt, not me. The government is responsible for paying its debt. Not me.”
So let me ask you: Who is “the government”? It isn’t some ethereal entity somewhere out there. The government is us! If you ever voted, you are part of the “government” as you had a hand in picking the people to represent your interest and the ones, who make the rules to borrow/spend us into oblivion.
To AK for Freedom grow up! That debt has been growing for decades and each administration added to it, so get off your high horse and become part of the solution not just the guy, who can’t admit that he is part of the problem by blaming it all on “the other guy”.
At least they could pay off their student loans quicker.
Love it now do federal income tax!
The tip tax probably costs more to implement than it brings in
If tips aren’t taxed, isn’t the value of a tip 28% more?
Do you know any servers in a better restaurant? The walk away & expect $400-500. a night. There is a big difference between the take home tips of a breakfast cafe waitress and a hopping, mid to high scale restaurant server.
how about a living wage for service workers so they don’t need to depend on the kindness of strangers tossing them money? It’s absurd that in America, it is legal to pay a server less than $3/hr. Trump is not for the service worker. During his administration, he tried to pass legislation that would pool all service tips and take the money away from those that earned it.
“less than $3/hour”
Kara please state your source.
Please also explain what exactly do you consider a “living wage”? Should remuneration not depend on your qualifications and job performance?