Trump Vows To Eliminate Taxes For 'People Making Tips' At Vegas Rally - Forbes

Topline

Former President Donald Trump on Sunday vowed that one of the first things his administration would do if he is elected would be changing federal laws to not tax workers who make a portion of their income from tips, specifically mentioning hotel workers and other restaurant employees.

Key Facts

At a rally in Las Vegas, the first since the former president was convicted on 34 felony charges of falsifying business records, Trump said, “When I get into office, we're not going to charge taxes on tips—people making tips."

It was the first time Trump has ever mentioned changing tax law to benefit tipped workers and it wasn’t immediately clear exactly what policies he means to change.

He said taxing tips given to employees has "been a point of contention for years and years,” and said a break on taxes “really is deserved” for such workers.

Trump did not elaborate on the proposal at the rally and representatives for his campaign did not immediately respond to Forbes’ request for comment Sunday.

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Crucial Quote

“Those people who have jobs in restaurants, whatever the job may be, a tipping job, we aren’t going after for taxes anymore,” Trump said, a change he asserted would be made “right away.”

How Are Tips Taxed?

Any tips to service workers that total more than $20 in a given month are subject to federal income taxes. Tips through electronic means, like credit card payments, are automatically reported to employers, and employees are also expected to total the amount of their cash tips and report them on individual income tax returns.

Big Number

45%. That's how much in taxes owed on tips the IRS estimates it loses out on per year due to inaccurate reporting. The IRS estimates that it gets 99% of what it’s due on regular wages, but only 55% of what it's owed on tips.

Key Background

The tourism-driven city of Las Vegas, where Trump announced his plan, has tens of thousands of service workers who rely on tips to make a living. Leisure and hospitality is the main industry in Las Vegas, according to Nevada's state Office of Workforce innovation, accounting for 26% of total employment as of January 2023. The industry includes hotels, restaurants, bars, entertainment venues and other employers whose employees often rely on tips from customers to flesh out their income. Nevada plans to institute a uniform minimum wage of $12 per hour for all employees, whether or not they are tipped, on July 1, but that standard isn’t the same across the country. In other states, like Texas, North Carolina, Utah and beyond, tipped workers are legally allowed to be paid as little as $2.13 per hour, as long as the salary and the tips they make ultimately equal or exceed the minimum wage requirement. If reported tips do not reach the minimum wage, the employer is required to make up the difference.

Contra

Trump said eliminating taxes on tips has "never been brought up before," but that's not true. Former Rep. Ron Paul, a Libertarian from Texas, introduced a plan to stop federal taxation of tips and even elaborated on the proposal at a news conference in the same city as Trump—Las Vegas—in 2012. At the time, Paul was running for the Republican Party nomination for president (he ultimately lost the nomination to Mitt Romney, now a senator from Utah). Paul also authored an op-ed on the proposal in the Las Vegas Sun, in which he called tipped workers "overtaxed" and said he would work toward "abolishing all taxes on tips once and for all."

Further Reading

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