'No Tax on Tips' Proposal Meets Limits of Reality

[Dem4life1970]

This discussion thread was locked as off-topic by Emile (a host of the Latest Breaking News forum).

Source: Bloomberg

As a slogan, it’s hard to beat “no tax on tips.” When a waitress uttered those four words to President Donald Trump last year, he said he instantly replied: “You just won the election for me.” The phrase, along with “no tax on overtime,” soon became key parts of his campaign’s pitch to working-class voters.

Now the trick is turning slogans into tax legislation. When Republican lawmakers this week released their first, 389-page draft of a bill that could take months to become law, there they were on pages 23 and 32, respectively: sections titled “No Tax on Tips” and “No Tax on Overtime.” And each made instantly clear that American workers are still going to pay plenty of taxes on their tips and overtime.

Early versions of the proposals were vague—for example, suggesting that anyone including investment bankers and lawyers might start earning income in gratuities as a way to reduce their tax burden. That was never likely, and indeed the legislation limits tax-free tips to occupations that “traditionally and customarily” receive them. (The Treasury secretary will need to come up with a list.) Also barred from both breaks are employees designated as “highly compensated,” an income threshold of $160,000 or more in 2025.

Another big limit: The federal government collected $1.7 trillion in payroll taxes and $2.4 trillion in individual income taxes in the 2024 fiscal year. Working-class Americans pay far more into the first category than the second, yet the proposed carve-outs for tips and overtime apply to only income taxes, not payroll taxes. That makes the tax breaks far less lucrative, while rendering them useless for those who pay no income taxes at all—including, according to the Budget Lab at Yale, 37% of tipped workers.

Read more: https://www.bloomberg.com/news/newsletters/2025-05-15/-no-tax-on-tips-has-limits-in-republican-tax-bill

---

No surprise that the same man who promised a big beautiful wall (lie) and said Mexico would pay for it (lie), promised no tax on tips (see the pattern)?

[marble falls]

1. Been so much undeclared income by tipped employees. They screw themselve at SS time.

[IbogaProject]

5. There has been inputed tips for years

The IRS requires resturants to calculate hypothetical tips from cash paid on checks based in what is paid as tips on credit payments at same resturant truly insane as it is based on an estimate. That came about during Daddy Bush's term.

[kkmarie]

8. What do you do to live if you have a job where your tips are so important to day to day living

I worked as a waitress (1972 to 1976) my hourly pay was $1.60 per hour. Then I began bartending hourly was $2.20.
Effective February 2025 minimum wage for tipped employees is $4.74, here in Michigan. If you are lucky enough to get a job waiting tables or tending bar where you are working 40 hours a week at $4.74 per hour, you're grossing $189.60 per week. In Michigan your net is $175 per week. And multiply by 4 weeks your net for the month is $700.

A tipped employee engages in an occupation in which he or she customarily and regularly receives more than $30 per month in tips. An employer of a tipped employee is only required to pay $2.13 per hour in direct wages if that amount combined with the tips received at least equals the federal minimum wage. If the employee's tips combined with the employer's direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage, the employer must make up the difference. Many states, however, require higher direct wage amounts for tipped employees.

https://www.dol.gov/general/topic/wages/wagestips#:~:text=An%20employer%20of%20a%20tipped%20employee%20is,the%20employer%20must%20make%20up%20the%20difference.

$2.13 is the federal minimum wage

[Norrrm]

2. Then they would be taxed on the minimum waiter/waitress wage only.

The expected wage with tips is expected to be higher.

[RainCaster]

3. Billionaires get no tips

The GOP is only making changes for the billionaires. Us working stiffs have to make up for the taxes the wealthy don't pay.

[Walleye]

4. So many maga types can't distinguish between income tax and FICA

To them it is all the hated “taxes”

[newdeal2]

6. If tips aren't taxed, will people just tip less?

Assuming the server is in the 12% tax bracket, and now they pay nothing on tips, wouldn’t diners lower their tips by 12%?

[PJMcK]

7. Not me

When I was much younger, I waited tables to get through college. It’s really hard work to do well!

I always tip service workers at least 15%. Their regular pay isn’t even the minimum wage! Services workers are not in the 1%.

[Puppyjive]

9. Social Security Retirement Checks

Tipped workers are already feeling the pain of not paying their taxes. They have some of the lowest retirement checks social security issues. Remember, you get out of it what you pay into it.

[Emile]

10. After an alert, locking post.

No analysis or opinion pieces allowed in Latest Breaking News and the article is over the 12 hour limit in the SOP.