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

[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.

[Harmless Teddy Bear]

I have presented nothing but facts.

You are not paying the waiter wages.

If you were you would be the employer and you are not. If you are the employer you would then need to fill out a whole bunch of paperwork, you would have to pay FICA, you would have to pay unemployment insurance and many other things and you don't. So they are not your employee, you are not paying wages, you are giving a gift.

So, gift tax exemption.

I am not sure what is so difficult about this concept.

I guess it is because of the way the media has presented it to the public for so long. And as we know, the media is not very accurate.

[NorthMountain]

I have presented nothing but facts.

You have presented a bizarre opinion that is at odds with the facts.

The most basic fact relevant to the issue is that you give money to a waiter because he did some work for you. That is payment for services rendered; neither more nor less. Any argument otherwise, such as you have presented, is utterly specious.

You seem determined to have the last word, so you're welcome to repeat your erroneous argument if you like ... you will get no further response from me.

I have a life.