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Donald Trump’s Tips-Tax Gambit. He plays Biden-lite on tax policy with a carve-out for tipped income. His 2017 tax reform was better policy.
Wall Street Journal ^ | June 17, 2024 | WSJ Editorial Board

Posted on 06/19/2024 10:47:07 AM PDT by karpov

The election campaign between Donald Trump and Joe Biden is so far largely a personal showdown, but their policy ideas matter to the country’s prosperity. Mr. Trump can claim the better record on the economy, thanks in part to his 2017 tax reform, so it’s too bad he’s now floating special-favor tax ideas like exempting worker tips from federal taxes.

“For those hotel workers and people that get tips, you’re going to be very happy,” Mr. Trump said on a recent swing through Nevada, “because when I get to office, we are going to not charge taxes on tips.” He repeated the line in Florida: “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!”

The political play for working-class voters here is blatant, and no doubt it will be popular with tipped workers. Mr. Trump at least wants to reduce taxes (except for tariffs), while Mr. Biden is promising several trillion dollars in tax increases. Mr. Trump’s play to hotel workers and waiters is also less economically damaging than President Biden’s vote-buying with welfare spending and student-loan forgiveness. Exempting tips could encourage more work among some parts of the labor force.

But Mr. Trump is pitching another carve-out that would erode the tax base. Many tips currently go unreported as income, and the lost revenue from an exemption is hard to estimate. The Committee for a Responsible Federal Budget, which dislikes most tax cuts, figures the exemption would cost the federal fisc at least $150 billion over 10 years.

One problem is that workers and many employers will inevitably rearrange their income to exploit the tips tax advantage.

(Excerpt) Read more at wsj.com ...


TOPICS: Business/Economy; Editorial; Politics/Elections
KEYWORDS: fusiongps; glennsimpson; peterfritsch; rinopropaganda; tipstax; trump; wsj; wsjrussiadossier
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Full article. Instead of treating some pay different from other pay, it would be better to lower tax rates.
1 posted on 06/19/2024 10:47:07 AM PDT by karpov
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To: karpov

Exactly. This is a gift to large employers of tipped employees (such as the Trumps), but patently unfair and of no general economic merit.


2 posted on 06/19/2024 10:50:40 AM PDT by 9YearLurker
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To: 9YearLurker
Tips are gifts and should not be taxed.

People can give a gift of up to $18,000 to anyone and it is considered a gift and not taxed. But if I give $20 to a waiter it is suddenly "income" because of their job?

3 posted on 06/19/2024 10:53:57 AM PDT by Harmless Teddy Bear ( Roses are red, Violets are blue, I love being on the government watch list, along with all of you.)
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To: karpov
One problem is that workers and many employers will inevitably rearrange their income to exploit the tips tax advantage.

So what? It’s no different than wealthy Americans earning income as capital gains to exploit the capital gains tax advantage.

The WSJ is transparently full of crap on this … and they destroyed their credibility with just one sentence.

4 posted on 06/19/2024 10:56:23 AM PDT by Alberta's Child (“Ain't it funny how the night moves … when you just don't seem to have as much to lose.”)
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To: karpov

Many states are eliminating the tipped income minimum wage differential.

The era of 15% to 20% typical tips is going to be replaced by $1 to $3 typical tips.

This will take time to happen as I personally can’t say which states have eliminated the differential, but once diners learn, they will typically tip differently.


5 posted on 06/19/2024 10:58:00 AM PDT by Brian Griffin
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To: karpov

I wonder how many on the WSJ board have ever worked for tips (as opposed to grift) in their lives.


6 posted on 06/19/2024 11:00:57 AM PDT by Niteranger68 (If you don't vote, you are part of the rigging.)
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To: Alberta's Child

Agreed.

WSJ. with their Gentry/Hedge Fund economics is such a joke.

For them, tax exempt tips is an unjustified tax carve-out, but “Carried Interest” is important support to job creators.


7 posted on 06/19/2024 11:02:15 AM PDT by Reverend Wright ( Everything touched by progressives, dies !)
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To: karpov

Trump knows the IRS is going bye bye. the no tax on tips is an easy promise to make. Soon there will be no income tax at all.


8 posted on 06/19/2024 11:02:24 AM PDT by Georgia Girl 2 (The only purpose of a pistol is to fight your way back to the rifle you should never have dropped)
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To: karpov
One problem is that workers and many employers will inevitably rearrange their income to exploit the tips tax advantage.

So what? We are taxed enough already.

9 posted on 06/19/2024 11:03:23 AM PDT by frogjerk (More people have died trusting the government than not trusting the government.)
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To: karpov

WSJ = RINO Central

It may not be the best tax policy in a vacuum, but it makes a good play for the younger vote, as it is younger workers who tend to be tip earners.

We’ll need all the votes from all the demographics we can get.


10 posted on 06/19/2024 11:05:50 AM PDT by Eccl 10:2 (Prov 3:5 --- "Trust in the Lord with all your heart, and lean not on your own understanding")
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To: 9YearLurker
Exactly. This is a gift to large employers of tipped employees (such as the Trumps), but patently unfair and of no general economic merit.

What about small employers who employ the vast majority of Americans? Why is the Wall Street Journal playing class-warfare with taxes?

Why does the government get a piece of your gift because you chose to provide good service?

The government had nothing to do with you serving scrambled eggs hot with an extra cup of hot coffee without forgetting the condiments, milk and sugar.

11 posted on 06/19/2024 11:06:40 AM PDT by frogjerk (More people have died trusting the government than not trusting the government.)
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To: Alberta's Child

They destroyed their credibility years ago.


12 posted on 06/19/2024 11:08:00 AM PDT by Fledermaus (We Are Now In A Civil War!)
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To: Brian Griffin

Sorry, only Virginia and West Virginia have eliminated the differential according to this:

https://www.paycor.com/resource-center/articles/minimum-wage-tipped-employees-by-state/

Florida still has a differential:

“Florida $13.00 (eff. 9/30/24) $3.02 $9.98 (eff. 9/30/24)”

The differential is most states is either still substantial or almost completely retained.


13 posted on 06/19/2024 11:09:01 AM PDT by Brian Griffin
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To: Eccl 10:2
I really don't care about a play for the younger vote per say, but I get what you are on about.

The bigger question is why isn't the government satisfied with taxing your payroll income but has to get some of your tips as well?

Ask any reasonable person if the government spends your tax money wisely...I would expect everyone to answer in the negative.

That is enough proof that the government doesn't need a bite our of that tip you earned for giving your guest an extra dry martini or cooking that steak just right. The government had nothing to do with your conscientiousness or pride in your job.

Think of how screwed up that is, the government taxes you on your pride at doing your job correctly, effectively and with a smile.

14 posted on 06/19/2024 11:11:58 AM PDT by frogjerk (More people have died trusting the government than not trusting the government.)
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To: Harmless Teddy Bear

Uh, no.


15 posted on 06/19/2024 11:15:32 AM PDT by 9YearLurker
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To: frogjerk
Why does the government get a piece of your gift because you chose to provide good service?

Even worse is the worthless guy that works with you gets a share of your tip. I don't know if that is voluntary or law but many businesses pool tips and divide them up at end of day.

16 posted on 06/19/2024 11:15:56 AM PDT by itsahoot (Many Republicans are secretly Democrats, no Democrats are secretly Republicans. Dan Bongino.)
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To: frogjerk

Sure, but it saves the Trumps more than it saves Joe Small Town.


17 posted on 06/19/2024 11:16:12 AM PDT by 9YearLurker
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To: Georgia Girl 2

“Trump knows the IRS is going bye bye. the no tax on tips is an easy promise to make. Soon there will be no income tax at all.”

What a 200-year reprieve to pay your income taxes?

Wholly DACA-style, Batman!!!


18 posted on 06/19/2024 11:17:06 AM PDT by Brian Griffin
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To: 9YearLurker

Trump & his companies save nothing.

Unless he helps out at Mar-a-Lago.

DJT, this $10 is for your service and your legal expenses.


19 posted on 06/19/2024 11:19:54 AM PDT by Brian Griffin
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To: 9YearLurker
Uh.. yes.

Let the playing field be level.

I gave the guy who did some work on the property a tip that was about one third of the bill I paid to the company. He did an excellent job. Much better than the last guy they sent out who did not get a tip.

It was a gift, not wages. The issue of wages was settled when I paid the bill.

20 posted on 06/19/2024 11:20:23 AM PDT by Harmless Teddy Bear ( Roses are red, Violets are blue, I love being on the government watch list, along with all of you.)
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