In Nevada, Trump proposes ending taxation of tips

[VySky]

I support this move from Trump

30 plus years ago in CA my wife worked at Carrow's. We had to pay tax on tips based on her sales receipts at 8-10% depending on shift.

Problem is, not everyone tips in a Mexican culture that in our area, was ~70% of her customers.

It was a very unfair form of taxation. Not sure if that is still the case however.

===================================

Campaigning in a state powered by the service industry, Donald Trumpsaid on Sunday that his administration would eliminate taxes on tipped income as a “first thing” if he is reelected.

“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,” Trump said during a rally in Las Vegas.

Any change to the taxation of tipped income would require an act of Congress. When asked for more detail on the policy change, a spokeswoman said: “President Trump will ask Congress to eliminate taxes on tips.”

Lawmakers will have a chance to rewrite the country’s tax policy in 2025, when much of Trump’s 2017 tax cut package expires. Tipped wages weren’t addressed in the original legislation, but Congress could include them in any overhaul or extension it attempts next year.

https://www.washingtonpost.com/politics/2024/06/09/trump-tipped-wage-tax-cut/

 

[ttwtt78640]

I’d have to see details of this proposed tax law change. Would the elimination of tips as reported income include getting rid of the lower (federal and state) MW requirement (allowance?) for tipped employees?

What’s the Minimum Wage for Tipped Employees By State? - NerdWallet

Tipped employees receive a cash wage of at least $2.13 combined with tips to reach the federal minimum wage of $7.25 per hour.

www.nerdwallet.com

 

[VySky]

I’d have to see details of this proposed tax law change. Would the elimination of tips as reported income include getting rid of the lower (federal and state) MW requirement (allowance?) for tipped employees?

What’s the Minimum Wage for Tipped Employees By State? - NerdWallet

Tipped employees receive a cash wage of at least $2.13 combined with tips to reach the federal minimum wage of $7.25 per hour.

www.nerdwallet.com

IMO, taxation on sales receipts assuming tips were paid is unfair. In hispanic culture, tipping is not common and when they did tip, assuming it was always at a minimum of 8% was irrational.

 

[ttwtt78640]

IMO, taxation on sales receipts assuming tips were paid is unfair. In hispanic culture, tipping is not common and when they did tip, assuming it was always at a minimum of 8% was irrational.

OK, but does this change mean that some workers then can (and will?) be paid less than the federal MW?

 

[VySky]

OK, but does this change mean that some workers then can (and will?) be paid less than the federal MW?

Who knows at this time. I can't see why that would be the case.

The initiative is to create an environment where workers come back to the service industry. We all have experienced restaurants understaffed.

 

[HenryChinaski]

If Trump says it, it’s either a lie or too good to be true and they’ll wind up losing money.

 

[Slartibartfast]

Businesses should just pay people enough that tips are not needed.

 

[The AntiDonald]

I support this move from Trump

30 plus years ago in CA my wife worked at Carrow's. We had to pay tax on tips based on her sales receipts at 8-10% depending on shift.

Problem is, not everyone tips in a Mexican culture that in our area, was ~70% of her customers.

It was a very unfair form of taxation. Not sure if that is still the case however.

===================================

https://www.washingtonpost.com/politics/2024/06/09/trump-tipped-wage-tax-cut/

Was that before or after he went off script and started rambling about shark attacks?

 

[NuffSaid]

This tax relief will follow his epic healthcare plan.

 

[Rumblefish]

Two observations:

1. Trump vote buying.

2. Potentially HORRIBLE public policy. Why? Because the possible effect on SS retirement benefits. IF FICA taxes are not imposed/collected on tip income, then the (tipped) employee's wage history with SS will be severely understated. That is, if the worker's true tipped income annual wage is $30,000 a year....but tips are 25% of that....then not taxing - as in not collecting FICA -on tip income would make it appear the employee's income is only $22,500 per year for SS purposes.

Why is understating income for SS purposes a problem? Because your wage history (as indexed for wage inflation until age 60 y.o.) determines your retirement and survivor SS benefit.

So, lower wage history (due to not taxing tip income) results in lower SS benefits.

Moreover, due to SS "bend points," SS replaces MORE of the income for lower paid workers than it does for higher paid workers.

Finally, SS is "pay in - pay out" so reducing the amount of FICA taxes collected would likely lead to further instability in the SS program.

 

[bongsaway]

Unreal. I don't see any of y'all complaining about the hourly pay these servers have to swallow, $2.13 an hour and hopefully the tips will make it reach minimum wage. Sad. These folks aren't our servants, they are people just like us trying to make enough to live and y'all are talking about not taxing their tips. As usual the business owner profits while others struggle to make a living. Sounds like the typical way Republicans think.

 

[VySky]

So, lower wage history (due to not taxing tip income) results in lower SS benefits.

Typical waiters/waitress only work in the industry a short time on path to better wages doing something else. There is little impact on future SS wages.

 

[Rumblefish]

Typical waiters/waitress only work in the industry a short time on path to better wages doing something else. There is little impact on future SS wages.

Some do, some don't.

But since SS counts 35 YEARS worth of wages - and again indexes (i.e., increases them) for inflation - then yes, there is definitely an impact on future SS benefits.

Including if you have survivors claiming on a SS number holders before the SS number hits retirement - e.g., 50 year number holder dies with 2 minor children....minor children collect SS survivor benefits based on number holder's income history.

 

[ttwtt78640]

Who knows at this time. I can't see why that would be the case.

The initiative is to create an environment where workers come back to the service industry. We all have experienced restaurants understaffed.

Why would someone come back (or start working) for a (potential) pay cut?

 

[Rumblefish]

There is a WAY to "buy these votes" without affecting SS retirement benefits....which is to COLLECT FICA taxes on the full tipped income.

But, to give ONLY an INCOME tax deduction or credit for the tipped portion.

Still, what is the plan to offset the loss of income tax revenue?

 

[The AntiDonald]

Two observations:

1. Trump vote buying.

2. Potentially HORRIBLE public policy. Why? Because the possible effect on SS retirement benefits. IF FICA taxes are not imposed/collected on tip income, then the (tipped) employee's wage history with SS will be severely understated. That is, if the worker's true tipped income annual wage is $30,000 a year....but tips are 25% of that....then not taxing - as in not collecting FICA -on tip income would make it appear the employee's income is only $22,500 per year for SS purposes.

Why is understating income for SS purposes a problem? Because your wage history (as indexed for wage inflation until age 60 y.o.) determines your retirement and survivor SS benefit.

So, lower wage history (due to not taxing tip income) results in lower SS benefits.

Moreover, due to SS "bend points," SS replaces MORE of the income for lower paid workers than it does for higher paid workers.

Finally, SS is "pay in - pay out" so reducing the amount of FICA taxes collected would likely lead to further instability in the SS program.

Trump gets a lot of his ideas and talking points from the Heritage Foundation. What is one of the foundations main goals? They desperately want to reform entitlements. It's just possible that Trump's proposed tax policies have an underlying agenda.

 

[VySky]

Some do, some don't.

I would argue most don't.

Note keyword "short time".



A common first job for many young people, no matter which career path they take after, is working in front of house in a restaurant. Working as a waiter/waitress for a short time will let you develop your customer service, communication, and teamwork skills while you put some cash in your pocket.

The Career Path of a Waiter/Waitress: An Exciting Journey - hosco.

Discover the steps in the waiter/waitress career path. We go in depth about salaries, job roles, and the skills needed to succeed at each level.

advice.hosco.com

 

[VySky]

Why would someone come back (or start working) for a (potential) pay cut?

Assuming your fear is accurate, they wouldn't.

 

[ttwtt78640]

Two observations:

1. Trump vote buying.

2. Potentially HORRIBLE public policy. Why? Because the possible effect on SS retirement benefits. IF FICA taxes are not imposed/collected on tip income, then the (tipped) employee's wage history with SS will be severely understated. That is, if the worker's true tipped income annual wage is $30,000 a year....but tips are 25% of that....then not taxing - as in not collecting FICA -on tip income would make it appear the employee's income is only $22,500 per year for SS purposes.

Why is understating income for SS purposes a problem? Because your wage history (as indexed for wage inflation until age 60 y.o.) determines your retirement and survivor SS benefit.

So, lower wage history (due to not taxing tip income) results in lower SS benefits.

Moreover, due to SS "bend points," SS replaces MORE of the income for lower paid workers than it does for higher paid workers.

Finally, SS is "pay in - pay out" so reducing the amount of FICA taxes collected would likely lead to further instability in the SS program.

What you say is true, but investing that tax free tip income could easily provide a better retirement benefit than the SS supplement does.

 

[Rumblefish]

Why would someone come back (or start working) for a (potential) pay cut?

Again, talking out of both sides of mouth.

On the one hand....VySky maintains that most tipped employees work in these jobs for short periods of time OR as a path to better wages.

But, contends that people would "come back" to this (temporary) employment or step down the wage ladder because of this proposed tax break.

 

[Rumblefish]

What you say is true, but investing that tax free tip income could easily provide a better retirement benefit than the SS supplement does.

But, most tipped employees are NOT investing any surplus income....because they have no surplus income being lower income earners. That is, more of their income is consumed on living expenses.

So, yeah, they get hurt worse on SS they'll likely need at retirement.

 

[VySky]

There is a WAY to "buy these votes" without affecting SS retirement benefits....which is to COLLECT FICA taxes on the full tipped income.

What full tipped income? It used to be based on sales receipts. IDK if that is still the case. But an example

Waiter works 5 hour shift with sales receipts totaling say $1000.

Total tips received ~5% @ $50.00. Remember, tipping is not mandatory

Yet the waiter will pay 8-10% tax of $100.

I don't see that as fair.

 

[VySky]

But, contends that people would "come back" to this (temporary) employment or step down the wage ladder because of this proposed tax break.

I believe they would come back. For a short period of time.

 

[multivita-man]

I support this move from Trump

30 plus years ago in CA my wife worked at Carrow's. We had to pay tax on tips based on her sales receipts at 8-10% depending on shift.

Problem is, not everyone tips in a Mexican culture that in our area, was ~70% of her customers.

It was a very unfair form of taxation. Not sure if that is still the case however.

===================================

https://www.washingtonpost.com/politics/2024/06/09/trump-tipped-wage-tax-cut/

Income is income. If you don't get tip income, you don't get taxed on the tip, because the tip doesn't exist.

 

[Rumblefish]

What full tipped income? It used to be based on sales receipts. IDK if that is still the case. But an example

Waiter works 5 hour shift with sales receipts totaling say $1000.

Total tips received ~5% @ $50.00. Remember, tipping is not mandatory

Yet the waiter will pay 8-10% tax of $100.

I don't see that as fair.

ROTFLMAO

You never worked for tips, have you??

It's actually the REVERSE is true...."tip income" is UNDERREPORTED for service employees .... so they already get a tax break.