> Trump and Harris promise to end federal taxes on tips, but that could face challenges
Trump and Harris promise to end federal taxes on tips, but that could face challenges
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Former President Donald Trump and Vice President Kamala Harris have at least one thing they agree on: they both want to eliminate federal taxes on workers’ tips.
Both candidates announced those positions in Nevada, which has one of the highest concentrations of tipped service workers in the country.
Lawmakers from both parties are also backing legislation that would make the change.
Some say the change would help tipped workers, who tend to be younger and lower income.
But others say the plans are flawed and would encourage wealthier workers like lawyers to shift their compensation to tips.
Prof. James R. Hines, Jr. from the University of Michigan Law School says that tips have always counted as income, and implementing a change would take the efforts of Congress.
“Of course, Congress could change the law and provide an exception for tips. And they could do it in a way that is somehow tied to the rest of your income. Here's the difficulty: To start with, if we have an exclusion for tips, then we have to distinguish tips from other forms of compensation. And that's extremely difficult to do,” Hines said.
Hines also points out that addressing these issues in a presidential campaign proposes its own challenges.
“Presidential campaigns are not great for addressing these central problems because of course the answer has to be painful. Either you cut spending or you raise taxes. Neither of which is popular,” Hines said.
Either way, eliminating taxes on tips could be easier said than done.