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.
