Additional Coverage:
- Union leader says no taxes on tips is the flawed policy we need because ‘working class families can’t wait for aspirational ideas’ (newsbreak.com)
Every time a server delivers a meal, a mover transports delicate items, or a hairdresser styles a client, their earnings depend on the goodwill of others. They hope for substantial tips.
For many in the service industry, tips are essential, not just extra income. This issue has gained attention as both former President Donald Trump and Vice President Kamala Harris recently suggested eliminating tip taxes.
Economists showed tepid reactions to the proposal, but it was popular among tipped workers and their employers. Removing taxes on tips could increase workers’ immediate income but doesn’t address the broader issue of raising the minimum wage.
Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union Local 226, emphasized the connection between Harris’s proposal and the need for a higher minimum wage. The union, representing 60,000 hotel and restaurant workers in Nevada, endorsed Harris’s plan due to its potential to address the wage issue more broadly.
A Harris spokesperson stated that the Vice President plans to advocate for both tax relief on tips and a minimum wage increase. The Trump campaign did not provide a comment.
Pappageorge pointed out that while these discussions are necessary, financially struggling individuals cannot afford to wait for societal changes; they need immediate solutions. He expressed concern that the issues might not be resolved soon, highlighting the urgency for families in need.
Pappageorge also noted that the poorest workers earn too little to benefit from a tax break since their earnings are already below the taxable income threshold. Bernard Yaros, an economist, echoed this, mentioning the static federal minimum wage of $7.25 since 2009 and the lower purchasing power today compared to the 1950s.
The concept of a subminimum wage for tipped workers dates back to the 19th century and has been controversial, particularly since a 1996 law set the tipped minimum wage at $2.13. While some states and cities have abolished this lower wage for tipped workers, many efforts to change the federal rate have stalled.
David Viana, a chef and restaurant owner in New Jersey, argues for tips as private transactions between a customer and server, questioning government involvement.
Removing taxes on tips would highlight this personal aspect, according to Pappageorge, and could push for necessary wage discussions.
This feature was originally published on Fortune.com.