Trump and Harris’ Tip Tax Proposals Heat Up Minimum Wage Controversy

United States: Vice President Kamala Harris wants to remove taxes on tips, a plan that former President Donald Trump also supported earlier. Harris’ idea includes raising the national minimum wage, which has been stuck at USD 7.25 an hour since 2009. The success of this idea might depend on how people feel about changes to base pay, no matter who wins the election.

Current Wage Challenges for Tip Earners

Nevertheless, most tip earners receive only a ‘subminimum’ wage far below the federal level, which means that employers must provide the rest for the employees when the tips do not suffice. The U. S. subminimum, which only a few states have substituted by uniform hourly minimum wages, still stands at USD 2. 13 since at least 1991 they have been paid a rate of USD 9 an hour.

Criticism and Industry Response

As reported by NBC news, “It is heartening that everybody is now talking about it,” said Saru Jayaraman, president of One Fair Wage, a labour advocacy group, and director of the Food Labor Research Center at the University of California, Berkeley. But “it means nothing until we raise these workers’ wages and end the subminimum wage for tipped workers”, she said.

Without those changes, Jayaraman — who branded Trump’s plan a “fake solution” in June — would not support a stand-alone bill on tip taxes. “The one subject that over indexing with black voters, Latinx voters and youthful voters in this cycle is the ability to hold a job and the high cost of living,” she continued.

Criticism

That particular criticism amid the concerns by the fellow labour advocates that the proposal which the GOP lawmakers drafted into the legislation backed by the National Restaurant Association and would incentivize business owners to make more of their workers tip earners to save on taxes and the Harris campaign said this plan would include the strict rules to prevent that.

Major restaurant chains, represented by the National Restaurant Association, did not directly respond to Harris’ proposal, but restated their advocacy of the No Tax on Tips Act that was put forward by Senator Ted Cruz in July.

A spokeswoman from the trade body described the bill as any historic or ‘sensible legislation’ for people in the industry and consumers that would mean, ‘more money in people’s pockets at a time when everyone is feeling the pressures of rising costs. ’

Challenges and Public Sentiment

Consultants in taxes pointed out that it is impossible for most tip recipients to earn sufficient money for federal income tax and tipped employees in the US total to about 4m while the number of hourly unpaid workers that do not receive tips is way beyond that figure. Other tax policy analysts also argue that making tips tax free, would also be expensive and difficult.

And the growing  focus on the tip income comes as the consumers have become stingier tippers with the surveys which indicates many tip fatigued customers who are tied of being asked to help ensure that baristas and the servers earn enough to live on and the policy of the debate also coincides with a growing push to raise the minimum wages and do away with subminimum pay.