Former President Donald Trump announced during a campaign rally in Las Vegas that he plans on cutting federal taxation on tips, should he be returned to the White House by voters.
“For those hotel workers and people who get tips, you’re going to be very happy because when I get to office, we are going to not charge taxes on tips, people making tips,” former President Trump said to a packed crowd.
The former president said he would do this “right away, first thing in office.”
The proposal, one of former President Trump’s most substantive new policy ideas in months, appears to be a bid to increase his share of the blue-collar vote—a demographic that has historically gone to Democrats in battleground states, but has tipped more toward Republicans over the past decade.
President Joe Biden, meanwhile, has called on Congress to revamp the tax system to increase the tax burden on wealthy individuals and corporations.
In a March proposal, President Biden called for the creation of a wealth tax on individuals worth more than $100 million and for returning the corporate tax rate back to its pre-Trump level.
President Biden has also endorsed his party’s push in Congress to raise the federal minimum wage to $15 an hour and has called for a phasing out of the tipped minimum wage in restaurants.
Blue-Collar Voters
Former President Trump expanded on his plan in a post on Truth Social that he hopes that union and blue-collar workers will abandon President Biden in Republicans’ favor.The Culinary Union responded to the speech in a statement, saying, “Relief is definitely needed for tip earners, but Nevada workers are smart enough to know the difference between real solutions and wild campaign promises.”
Next year, key individual tax provisions of then President Trump’s Tax Cuts and Jobs Act of 2017, which cut individual tax rates, will expire. Should Congress fail to pass a new tax bill, individual taxes will return to levels last seen when President Barack Obama was in office.
The Tax Cuts and Jobs Act broadly focused on two areas of tax policy: corporate rates and individual rates. However, the legislation did not make any changes to preexisting law on income from tips.
It made permanent cuts to corporate tax rates, but cuts made to individual tax rates—including a roughly 3 to 4 percent reduction in tax rates across income brackets—will sunset in 2025.
Because of this sunset, the fate of individual tax rates will be determined largely by the results of the 2024 elections. Should Republicans sweep the House, Senate, and White House, they'll almost certainly pursue a reauthorization of former President Trump’s tax plan, which could include a change to taxation policy on tips if a future Trump administration pushes for it.
However, should the government again be divided during the next Congress, even if former President Trump takes the White House, it will likely be difficult for lawmakers to come to an agreement on the highly contentious issue.
