LAS VEGAS—With all the talk lately about eliminating the taxes on tips, major parts of the issue are not being addressed, it seems, by anyone – including presidential candidates, unions in Las Vegas, and others.
The first thing is that workers should be able to keep their tips so often stolen by employers who falsely claim they will use what they steal to compensate dishwashers, cooks, and others who don’t get tips. Unfortunately, people now pay at restaurants on their credit cards, rather than in cash, enabling bosses to steal tips. Workers should be able to take out their tips in cash as they turn in credit card payments from customers.
The second part is that the base wages of people who work for tips must be raised drastically so workers don’t end up with less than the minimum wage.
The third part is that the ability of wealthy people and hedge fund managers, for example, to declare huge chunks of their income as tips must be ended. By itself, the elimination of taxes on tips is not enough.
Democratic presidential nominee Kamala Harris has a two-pronged idea for raising the pay of millions of the nation’s most-exploited workers: Raise the federal minimum wage for the first time in 15 years, and ban the federal income tax on tips, too.
The minimum wage hike idea is the vice president’s own, though Harris didn’t say how much she’d raise it, during her August 10 speech in Las Vegas, the dominant city in swing state Nevada. Her boss, Democratic President Joe Biden, has ordered federal contractors to pay their workers $15/hour, though some have defied his mandate. He advocates that figure as the national minimum wage.
But eliminating the tax on tips, first advanced by Rep. Byron Donalds, R-Fla., and Sen. Ted Cruz, R-Texas, sidesteps the real problems tipped workers face: The federal tipped minimum wage is way too low, at $2.13 an hour. It hasn’t risen since the George H.W. Bush administration, 33 years ago.
Further, during the Republican Donald Trump regime, his Labor Department issued a rule ordering workers and managers to pool tips, with the bosses deciding how to divide up the total. That became wage theft, costing low-paid exploited workers millions of dollars, because the exploitative bosses hogged the money. Legislation and lawsuits halted that Trump scheme.
Legally, bosses also are supposed to make up the difference between a worker’s tips and the federal, state, or local minimum wage. In another form of wage theft, many don’t.
As a result, the Economic Policy Institute found in a pre-pandemic study that wage theft of all forms cost 2.4 million low-wage workers in the nation’s ten most populous states alone $8 billion annually. That’s an average of $3,300 per year for year-round workers or a quarter of their income.
And the Committee for a Responsible Federal Budget estimates the ten-year loss from eliminating federal taxes on tips at $150 billion-$250 billion, adding that could be low.
“In practice, exempting tip income from taxation would lead workers and employers to reclassify ordinary income as tip income where possible and could lead to a larger shift toward lower base pay and higher tipped income, more broadly,” it said.
But eliminating the tax on tips suddenly became politically popular, especially in a presidential election year and especially for workers who depend on tips—such as those at Unite HERE’s Culinary Workers Local 226, a 50,000-member local and political heavyweight in Nevada. It endorsed the plan. Then Harris did, too, in her August 10 speech to the union.
So, before her, did Republican nominee Trump. So did Sen. Jacky Rosen, D-Nev., in a tight re-election race against Trumpite Republican Sam Brown in the key swing state in this fall’s election.
Will continue the fight
“When I am president,” current Vice President Harris told the Las Vegas crowd, “we will continue our fight for working families of America, including raising the minimum wage and eliminating taxes on tips for service and hospitality workers.”
And so did Rep. Steven Horsford, D-Nev., the Congressional Black Caucus chair. He should know something about tipped workers and their wages. Horsford was a longtime top official of Local 226. Many of its members, such as chambermaids, hotel valets, bellhops, and restaurant servers, are workers of color who toil for tips.
Horsford endorsed the minimum wage hike, too. The Republicans—Trump and Brown among them—were silent on that. So is the national Republican platform, also known as Project 2025, conceived by the radical right Heritage Foundation.
The federal minimum wage of $7.25 an hour hasn’t risen in 15 years. Horsford endorses eliminating the tax on tips, and he wants to eliminate the tipped subminimum wage. The tipped workers should get the federal minimum, he said.
The Republicans’ legislation would let taxpayers who depend on tips take a 100% itemized tax deduction for the part of their pay that comes from tips. Taxpayers who don’t itemize would get the tax deduction, too, their measure says. But it’s silent on raising the tipped minimum wage, or the regular minimum wage, for that matter.
Horsford wasn’t silent when he talked tips and wages with the Nevada Current. “We need to end it,” he said of the tipped minimum wage. “On top of that, we need to address the tax policy” on tips “so it’s fair and equitable.
“Some of these employers are trying to keep workers at poverty wages. We need to break that. We need to break this idea that people can work for less than a fair minimum wage and for me, that’s a livable wage.”
He also pointed out that what states give—tipped wage increases—states can take away. Nevada, California, Alaska, Minnesota, Montana, Oregon, and Washington have replaced tipped minimums with the regular minimum wage for workers who also can take tips.
That’s what Chicago’s lawmakers decided last October. Their ordinance eliminates the city’s tipped minimum, now $11.02 an hour, by raising it by 8% yearly from then through July 1, 2028, when it is scheduled to reach the city’s current overall minimum.
The Center for American Progress says exempting tips from taxes does little for workers because at least a third of tipped workers don’t earn enough to pay income taxes. The rest would see little benefit.
Culinary Union Executive Secretary-Treasurer Ted Pappageorge, its top official, dismissed Trump’s line—which the Republican threw into his acceptance speech at the GOP convention in Milwaukee—as “a political stunt” to win votes in Nevada, given its swing state status.
Nevada Democratic Sens. Jacky Rosen and Catherine Cortez Masto also jumped on the “no tax on tips” bandwagon. But neither Rosen nor Cortez Masto nor Harris nor Horsford nor Trump mentioned, much less discussed, wage theft.
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