In Nevada this week, staff at the powerful Culinary Workers Union Local 226 pored through the latest draft text of the reconciliation bill to see a decades-long dream realized: a provision to eliminate federal taxes on income generated from tips.
“It’s surprising,” Ted Pappageorge, the local’s secretary-treasurer, told NOTUS. “There’s an opportunity here, if we can get this done right, to get some relief for tip earners.”
Taxes on tips were, ever so briefly, a main storyline of the 2024 election. Donald Trump went to Las Vegas in June and declared his support for eliminating them. Kamala Harris followed suit in August at her own stop in the city. The culinary union backed Harris, but also welcomed Trump’s support on the issue. Trump went on to win working-class voters.
Now, there’s not much debate about this issue that became shorthand for I care about hourly workers last year. Republicans in Congress are fighting over increasing the state and local tax deduction and cutting Medicaid in the reconciliation bill, and Democrats are hammering them over Medicaid, food benefits and tax rates. There’s been little to no Democratic messaging on the proposal.
But in truth, there is a lot to argue about on this topic and what it really means to champion the working class. Pappageorge said if what’s in the draft bill is what he can get, he’ll take it. But it’s not what he actually wants. There’s a chance, he said, for someone to stand up and fight over this relatively small thing and score huge points with an electorate everyone claims to care about.
Some Democrats think their party should be talking more about the issue and engaging this debate on the merits. “We could give service workers and hospitality workers a way bigger raise than the Republicans are offering,” said Rep. Greg Casar, chair of the Congressional Progressive Caucus. “The Republicans are giving the entire feast to the billionaires and throwing a crumb at tipped workers.”
What the culinary union wants is a law that both puts an end to taxes on tips and also eliminates the federal tipped wage, which is $2.13 an hour, meaning the minimum wage would be the same for everyone. Right now the federal minimum wage is $7.25 an hour, which the culinary union and most Democrats want raised significantly. Pappageorge said that if Trump really wants to fulfill his campaign promise to tipped workers, that’s what his bill should do.
Right now, it doesn’t: It just gets rid of taxes on tips and orders the treasury secretary to determine what jobs qualify as tipped. Pappageorge hopes the ongoing legislative process gets the proposal closer to where he wants it, and called on Democrats to make that push.
But also: He does not like what he’s seeing overall. “There’s all sorts of other, I will call it fugly, bits in this bill,” he said. “It’s a horrible bill that this “no taxes on tips” is attached to.”
Even some Republicans eager to make the party more populist think there’s a debate to be had about this provision. Sen. Ron Johnson said what’s in the House bill on taxes on tips is “not serious.”
“This is gimmickry. We shouldn’t be doing that anymore,” Johnson told NOTUS of the provision expiring in four years.
“I’m fully supportive on no tax on cash tips. But what they’re writing is no tax on some kinds of tips,” he added. “It’s the same with overtime. It’s going to be an accounting nightmare. That’s going to increase the regulatory burden.”
When Democrats have talked about tip taxes during the House process, it’s mostly been to point out that the provision expires in just a few years. They say the same thing about another Trump campaign promise-turned-provision: eliminating federal taxes on overtime pay.
Some progressive economists are making a different argument about Trump’s high-profile campaign promise: that it’s not actually a pro-worker policy in the first place. In February, the Economic Policy Institute published a study dismissing the idea as basically a lie.
“Overwhelmingly, the largest beneficiaries will be the tipped workers who are making the largest tips. So it’s already somewhat regressive,” David Cooper, one of the study’s authors, told NOTUS. “It’s very regressive in its structure, but the real beneficiaries, the people will consistently benefit, are their employers.”
While he said the proposal in the draft bill is “not as bad as it could have been,” Cooper said the problem he sees is eliminating taxes on tips this way could end the conversation about eliminating the tipped wage, meaning employers can continue to pay that 2.13 an hour. In other words, a conversation about raising minimum wages, an issue Democrats have led on for decades, becomes a conversation about a tax cut, which is where Republicans like to be.
It’s a complicated debate, Cooper acknowledged. And with all the other policies in the reconciliation bill, it’s a hard one for progressives to have right now.
“This is more a giveaway to businesses still than it is to the working class, even if it has some benefits for the working class,” he said. “Given that reality, I think it’s just forcing Democrats and advocates to dedicate their attention to these other aspects to the bill that are just more transparently harmful to working people.”
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Evan McMorris-Santoro is a reporter at NOTUS. Samuel Larreal is a NOTUS reporter and an Allbritton Journalism Institute fellow.