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If tips are no longer taxed then why wouldn’t we as diners just start tipping 10-15% instead of 20-25%? My wages are still taxes so we will just continue tipping the same overall amount to servers…
Basically, the bill gives a phased out exemption for up to $25K of tips (for jobs that customarily get tips) for individuals earning up to $160K
The reality is lower income people often owe zero income tax when they file and get a refund. Moreover, many qualify for the Earned Income Tax Credit which gives them back *more* than they paid in income taxes—it’s an intentionally subsidy. So, this exemption will have little to no benefit for lower income individuals and as it phases out, it will not help the people on the other end (up to $160K) very much either.
In fact it may *hurt* lower income people by making them ineligible for some or all of the Earned Income Tax Credit.
In short, this bill is a gimmick that will not help individual taxpayers very much, but will cost billions in additional revenue (even with the small individual impact).
What *would* help ALL lower income workers would be to raise the federal minimum wage. But, the shysters in Congress don’t want to actually do anything that would meaningfully help working class people.
Don’t understand why tips should be tax free. Tips are the true wages of servers. Why should their wages be tax free while those of the factory worker or plumber or fast food worker be fully taxed?
I just won’t tip at all then.
I just got from two week in Europe where the price is the price and there is no tipping because they never had a Jim Crow that created a class of sub-minimum wage jobs. People get paid enough to make a living.
This is going to be ripe for abuse, I can see my next plumbing bill will $1 and if he completes the work on time, a $249 tip.
The bill limits the ability to claim the exemption to jobs that are now customarily tipped. Plumbers would not fall onto this category, and any plumber changing their billing practice if this dumb gimmicky bill passes into law would be subject to audit by the IRS and state auditors for states that adopt federal tax laws (not all states do, so many people may still be subject to state tax on tips).
More importantly, this bill if passed into law would provided little to no tax relief to many lower income tipped workers since they already pay zero to little income tax, and it may even hurt them by affecting their ability to claim the Earned Income Tax Credit, which provides a subsidy to many lower income working class tax filers, even when they owe no tax. Those on the higher end of the income limit ($160K) will be subject to a phaseout, so their benefit will be blunted.
This is all smoke-and-mirrors. Throw the peasants crumbs while the billionaires get another massive tax break.
LOL. Nate only attracting the best and brightest here at the “business” journal.
IBJ reader: “I have no idea what I am talking about but Trump Bad! so I will heroically resist by stiffing my local server”
Well actually Chuckv – the real concern is that inside this bill it also legalizes bribery of government officials stating that a tip paid to a government official is also now acceptable and non-taxable…
Do not let the media headlines stop you from reading the bill and seeing how comical this all is
LOL, two-buck-Chuck going on about how the Grifter-in-Chief can do no wrong and dismissing any logical arguments against his smoke-and-mirrors policies as “Trump Bad.”.
Read the bill, I know, that may require effort. The whole thing is a gimmick that will not help most individuals at the lower end of the spectrum since they already do not owe (or owe very little) income tax. And, as the exemption phases out, it will not help the fewer who are at the end closer to making $160K a year. It is basically a $25K exemption for tips (in certain industries) subject to an income phaseout. It may even harm some lower income people by affecting their ability to claim the Earned Income Tax Credit.
What *would* help ALL working class people is meaningfully raising the federal minimum wage, which has not been increased since 2009.
I know you will claim my whole argument is “Trump Bad” and then run off and pout, but try engaging your brain on this one.