Democratic presidential nominee Vice President Kamala Harris listens backstage to her running mate Minnesota Gov. Tim Walz speak during a campaign rally at Desert Diamond Arena, Friday, Aug. 9, 2024, in Glendale, Ariz.
Vice President Harris blindsided Democratic lawmakers and progressive activists by endorsing a proposal first floated by former President Trump to exempt tips for service and hospitality workers from taxes, an idea that Democrats had previously criticized as “bogus” and a “ploy” for votes.
Harris’s support for the idea is being seen as an aggressive play for votes in Nevada, a critical swing state where service workers will be key, and as an effort to neutralize whatever advantage Trump may have gained by first floating the idea during meetings with GOP lawmakers on Capitol Hill in June.
But key Democratic lawmakers and progressive activists have raised serious concerns about the substance of the proposal to shield tipped income from taxation, worrying that it would leave out many lower- and middle-income workers who are just as deserving of tax relief but don’t work for tips.
Policy experts also question how such a proposal could be drafted without having major impacts on economic behavior, potentially costing the federal government much more than the $100 billion to $200 billion it is currently projected to add to the national debt over the next 10 years.
Another criticism from the left is that employers could use tax-free tips as an excuse not to raise base-level wages and could even prompt some businesses to become more aggressive in soliciting tips from customers in lieu of raising workers’ hourly pay.
“It’s not something I saw coming,” said one senior Senate Democratic aide. “I did not expect her to go on the tipped-wage thing. I did not see it as a serious proposal from Trump and it doesn’t become a serious proposal now.”
Senior Democrats on the Senate Finance Committee and House Ways and Means Committee, which have primary jurisdiction over the tax code, criticized the proposal when Trump first floated it in meetings with GOP lawmakers in June.
Trump told Republican senators that he got the idea from a waitress he met.
Senate Finance Committee Chair Ron Wyden (D-Ore.) called Trump’s idea to eliminate taxes on tips a “bogus proposal” and predicted it would be wiped out by other Trump policies, such as tariffs, that would increase the costs of goods.
Rep. Lloyd Doggett (D-Texas), a senior member of the Ways and Means Committee, called the proposal to shield tips from taxes an “election-year ploy.”
Lael Brainard, the director of the White House Economic Council, declined to comment on the idea of eliminating taxes on tips when Trump put it in the spotlight in June.
