Trump wants to eliminate taxes on tips. That’s one of the promises we’ve seen repeated year after year, but that never becomes reality. Well now, Republicans have once again brought this proposal to Congress: they finally want to remove taxes on tips. This time it’s not just a campaign slogan, but an attempt to make it happen.
Several Republican lawmakers have already put forward a proposal so that those who work in sectors like hospitality or tourism stop paying taxes on the money they earn in tips.
The idea, which is still in the debate phase, is to approve a temporary exemption, valid until 2028, that would only affect workers whose tips make up an essential part of their income. In other words: it’s not for everyone, and it’s not forever, but it could leave a bit more money in the pocket of people who literally live off their customer service.
Who would benefit from this?
In principle, this project is intended for professions where tipping is not just an occasional bonus, but part of the regular salary: waiters, bartenders, hotel staff… And it doesn’t apply to just anyone. Only those who earn less than $160,000 a year would be included, a fairly high figure considering that, for example, the average salary for a waiter in 2023 was about $36,500 according to the Bureau of Labor Statistics. Even in the highest percentile of that profession, it barely reaches $60,000.
And how much would be saved with this?
Well, it depends. According to the Tax Policy Center, an average worker could save up to $1,800 a year if their tips were tax-exempt.
For those earning less, the savings would be smaller, of course: around $200. Does that seem like little? Maybe, but for someone living paycheck to paycheck it could mean one less bill, one more grocery trip, or a slightly less stressful month of rent.
The debate is on fire…
Even though it sounds good at first, the proposal also has its critics. Even within the Republican Party, there are voices questioning the real usefulness of this measure. They say the impact is limited and that Congress should be thinking about broader tax reforms, not symbolic adjustments.
Joseph Rosenberg, from the Urban-Brookings Tax Policy Center, pointed out that nearly 40% of workers who rely on tips don’t even earn enough to really benefit from this exemption. And that, in the end, only a small minority will see a substantial change in their taxes.
What now?
For now, the project is stalled. A sector of the more conservative wing of Congress has it blocked and there’s no voting date in sight. So for now, everything stays the same, and we’ll have to wait for someone to change their mind or for the proposal to be modified to get the necessary votes.
For now, nothing is going to change, and of course, eliminating taxes on tips isn’t going to change everyone’s life, but it could be a small relief for many service sector workers. It’s a gesture, at least, toward those who depend every day on their own effort and the generosity of the customer.
Let’s be honest, every dollar counts, especially in these years of economic uncertainty… Jobs with variable income keep growing, and opening the debate on how these earnings should be taxed seems, at the very least, like a step in the right direction…