When Pigs Fly: Biden and Trump Agree
Well, folks, you know it’s a rare day in Washington when President Joe Biden and former President Donald Trump agree on anything. But in a stunning bipartisan twist, both political heavyweights have thrown their support behind a proposal to eliminate federal taxes on service industry tips.
Vice President Kamala Harris has also backed this initiative, emphasizing its significance for tipped workers nationwide. Before you close this tab thinking it’s too good to be true, let’s dive into the details.
The Proposal
The plan is straightforward: eliminate federal taxes on tips for service industry workers. This move could theoretically allow tipped employees to keep 100% of their hard-earned gratuities, improving their financial situation. Both Trump and Harris presented their proposals with great fanfare in Nevada, a state with a high number of tipped service workers. But like everything in politics, the devil is in the details.
Complications and Costs
Experts have pointed out that this change would be anything but simple. Implementing such a policy would be complex and costly, with estimates suggesting it could reduce federal revenue by $150 billion to $250 billion between 2026 and 2035. There are also concerns that high-income earners could manipulate their income to fall under the “tips” category, exploiting legal loopholes.
“You will have taxpayers pushing their attorneys to try to characterize their wage and salary income as tips,” said James Hines Jr., a professor of law and economics. “And some would be successful, inevitably, because it’s impossible to write foolproof rules that will cover every situation.”
Differing Approaches
Harris proposes that there should be an income limit and provisions to prevent misuse by wealthy individuals. On the other hand, Trump has not specified any such requirements, which might be a double-edged sword. While it simplifies the proposal, it opens the door to potential abuse. It remains unclear whether this exemption would apply to income taxes, payroll taxes, or both.
Political Jockeying
Both sides have wasted no time in turning this into a political football. Trump was quick to label Harris a “COPYCAT” after she backed a proposal he initially floated in June. Harris retorted by emphasizing her broader platform, which includes raising the federal minimum wage.
“We will continue our fight for working families of America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers,” Harris said in Nevada.
Congress would need to pass legislation to make this tax exemption a reality. Experts believe that adding more layers to an already complex tax code is not a walk in the park. Plus, a notable portion of tipped workers — around 37% — already pay no federal income tax, meaning this policy might offer limited relief.
A Path Forward
Despite the hurdles, the enthusiasm for this proposal from both parties indicates its potential to rally bipartisan support. But as always, the implementation and true impact of this policy will depend on the finer details, something that Congress will need to figure out.
So there you have it — a glimmer of unity in a sea of political division. But don’t get too excited just yet; this proposal has a long way to go before it can make any tangible impact. While Biden and Trump’s unusual alignment might be a reason to hope, let’s see how long this bromance lasts before reality sets in.
