US Vice President Kamala Harris (L) and former President Donald Trump
Reuters
Vice President Kamala Harris has pledged to eliminate gratuity taxes in the service and hospitality sectors if she wins the presidency, repeating the same proposal that former President Donald Trump announced months earlier.
Both candidates promised tax-free tips at separate rallies in Las Vegas, appealing directly to voters in Nevada, a key battleground state where the hospitality industry employs about a quarter of the state’s workforce, according to June. employment numbers.
“The it’s my promise to everyone here, when I’m president, we will continue our fight for America’s working families. including raising the minimum wage and eliminating tip taxes for service and hospitality workers,” Harris said at her Las Vegas rally on Saturday, which drew a crowd of more than 12,000, according to the campaign.
The proposal came a day after the Culinary Workers Union, a major labor group in Nevada, endorsed Harris. Before her rally on Saturday, Harris said her campaign plans to unveil an official economic policy platform in the coming days.
Trump quickly took to social media to claim credit for the proposal, which he introduced in June at his own rally in Las Vegas.
“[Harris] he has no imagination at all, as evidenced by the fact that he played ‘COPYCAT,’ NO TAXES ON TIPS,” Trump wrote in a Truly Social post on Saturday afternoon.
Banning tip taxes would require new legislation and congressional approval, a Harris campaign official later acknowledged.
The campaign official said Harris would work with congressional lawmakers to create a tax-free tip policy that would have income limits and requirements to prevent “hedge fund managers and lawyers from structuring their compensation in ways that try to benefit from the policy”.
These caveats respond to several criticisms that have already arisen of the tip tax ban.
According to the non-partisan Committee for a Responsible Federal Budgeteliminating taxes on service tips would leave a hole in federal revenue over the next decade of between $150 billion and $250 billion.
Beyond the hit to government revenue, some economists argue that a tax-free gratuity policy would not effectively achieve its goal of easing the tax burden on low-income Americans.
“The goal of the policy is to reduce the tax burden on low-income workers,” said Ernie Tedeschi, chief financial officer at Yale University. Budget workshophe told CNBC in June after Trump first floated the idea. “This is not a well-targeted, efficient way to do this.”
He noted that only a small portion of the low-income workforce is in tipped jobs, and many of those workers are younger or don’t already pay income tax because of their low wages.
He also argued that the policy could create a hierarchy of low-income jobs where only some workers reap the benefits of tax-free income. And he said the tiered approach could force employers to try to game the system by, for example, encouraging more tips instead of raising wages.
“What would an economy look like where we incentivize tipping so much?” Tedeschi said. “I have to imagine that smart tax lawyers and accountants who think about it for a while will come up with some really clever ways to take advantage.”
