No more taxes on tips! How about that for a blue-collar tax cut? That's the subject of the riff. Donald Trump's proposal for tax-free tips is sheer genius. He blasted it out at his rally in Las Vegas on Sunday. Take a listen:
DONALD TRUMP: "This is the first time I've said this and for those hotel workers and people that get tips, you're going to be very happy, because when I get to office, we are going to not charge taxes on tips, people making tips... It's been a point of contention for years and years and years, and you do a great job of service, you take care of people, and I think it's going to be something that really is deserved."
This really is similar to a payroll tax cut. It reduces employment taxes, but without all the complications of the big entitlement programs. Unfortunately, tips now are taxable income – they’re part of wages, tips, and other compensation in the W-2 IRS form and the Democratic Congress a couple of years ago in their war against workers passed an $80 billion IRS bill that theoretically would sponsor 87,000 new agents. Guess what? So far, they've hired 34, but the Biden Democrats tried to convince us that they were really chasing after millionaires. Don't buy it, folks.
Millionaires have layers of high-priced tax lawyers to protect them, but waitresses, service-oriented workers, people in the gig economy – they're the ones the IRS is really aiming at and tax-free tipping is going to help them a lot.
Think of your Uber driver's 20% tip or your favorite waitress at your local diner or the kindly chamber maids that clean up your hotel room. They're all going to get more money. That's a big part of Las Vegas, isn't it? Where roughly a quarter of the workers are in the leisure and hospitality industries.
Las Vegas is a big part of Nevada and Nevada is an important swing state that's a big part of a Trump presidential victory. Now, Joe Biden has been happy to tax tips. Plus, Biden has been trying to get federal contractors to raise the minimum wage, which would price out the marginal workers altogether.
By the way, according to the Wall Street Journal report, the head of the Culinary Union in Las Vegas likes the idea, but then he started trashing Trump. Kind of like the UAW – the left-wing union officials don’t like Trump, but the rank-and-file are going to vote for Trump. You wait and see.
By the by, the benefit of tax-free tipping is a lot like the exemption for employer-sponsored health insurance. It’s a tax-exempt benefit used by millions and millions of businesses.
President Trump is up by five points in the RealClearPolitics average of polls for Nevada, but his idea for tax-free tips will raise take-home pay for tens of millions of workers, across the country. Like I said, sheer genius.
This article is adapted from Larry Kudlow’s opening commentary on the June 11, 2024, edition of "Kudlow."
