Would Trump and Harris’ “no tax on tips” policies cost the US billions of dollars and neglect most low-earning workers?
There were an estimated 4 million tip workers (those who received more than $30 per month in tips) in 2023, about 2.5% of all employment. Moreover, only 5% of workers in the lowest income quartile are in this group, and 37% of them do not earn enough to pay federal income tax and therefore would not benefit from this tax cut.
With lower lifetime taxable earnings, tip workers could find reduced retirement benefits due to decreased contribution to Medicare and Social Security and may no longer qualify for the Earned Income Tax Credit.
The nonpartisan Committee for a Responsible Federal Budget estimated that the Trump plan of exempting tips from taxes would cost the government $150-$200 billion over the next decade. Even the more modest Harris plan would cost $100-$200 billion. These amounts balloon if workers shift more of their income into tipped wages.