Advocates for a living wage say Donald Trump’s recent pledge to end taxes on tipped income is an empty campaign promise that does little besides expose his naivete about working people and the economy. Economic experts cast doubt on the proposal.
However, they say Trump’s comments reveal an opening for President Joe Biden and other Democrats who support raising the wage floor and shifting the tax burden to the wealthy, two popular policies that most Republicans and lobbyists for big business bitterly oppose.
In a rambling speech over the weekend at a rally in Las Vegas, Nevada, where hospitality workers and their unions are a potent electoral force, Trump suggested hotel employees and other tipped workers would be “very happy” if he wins the presidency because his administration would not “charge taxes on tips.”
Trump claimed he would “do that right away, first thing in office,” though his campaign later acknowledged Congress would need to pass legislation to change the tax code. With Trump’s signature tax cuts for corporations and the wealthy expiring in 2025, lawmakers are expected to spend months haggling over the political and economic trade-offs that determine who pays how much in taxes.
Trump has pledged to extend those GOP tax cuts he first signed in 2017. Extending the income tax cuts alone would cost an estimated $3.3 trillion between 2025 and 2034, according to the Congressional Budget Office. The wealthiest fifth of Americans are expected to reap most of the benefits.
“Relief is definitely needed for tip earners, but Nevada workers are smart enough to know the difference between real solutions and wild campaign promises from a convicted felon,” said Ted Pappageorge, secretary-treasurer of the Culinary Workers Union Local 226 in Las Vegas, in a statement.
Trump is in the hospitality business himself and remains infamous for union busting and underpaying his employees.
Saru Jayaraman, president of One Fair Wage, a national campaign to end unfair wages and lift millions of service workers out of poverty, said Trump was simply pandering to voters impacted by the affordability crisis without addressing the root of the problem.
“This should serve as a rallying cry for Democrats to fully embrace what workers in every corner of the nation actually do need this year: a living wage with tips on top,” Jayaraman said in a statement. “While the idea of untaxed tips may appear beneficial, One Fair Wage sees Trump’s comments for what they are — a superficial attempt to pander to workers that distracts from the fundamental problem of low and subminimum wages.”
Subminimum wage schemes allow employers to pay food servers and other tipped workers a lower base wage if tips are earned on top. In red states like Louisiana and Alabama, that base pay can be as little as $2.13 an hour. Tipped income can vary widely, and in the United States, some customers simply do not tip enough.
To make ends meet amid rising prices, Jayaraman said employers must be required to pay the minimum wage in their area while providing workers with a chance to continue earning tips.
“Trump’s friends in the National Restaurant Association have lobbied for over 100 years to use tips in place of a stable, base living wage with tips on top,” Jayaraman said.
Jayaraman added that wage reform is a winning issue for Democrats ahead of the November elections. Up to 74 percent of voters support a federal minimum wage hike to $20 an hour. Polling shows that inflation and “jobs that pay a living wage” are top issues for millions of young voters, while economic anxiety could be hurting Biden among the Black voters and Latino voters that Democrats depend on.
In a pair of presidential runs, Sen. Bernie Sanders used populist messaging about raising the minimum wage and taxing the wealthy and corporations to great effect. In 2020, Biden promised to end subminimum wages altogether and raise the federal minimum wage to $15. The Department of Labor under Biden also placed strict limits on the amount of time tipped employees can perform tasks that do not solicit tips while their employer is paying subminimum wages.
However, Democrats were unable to pass a $15 federal minimum wage when the issue came before a divided Congress in 2021. Despite intense national anxiety over the cost of living and an unprecedented housing affordability crisis, Congress has not raised the paltry federal minimum wage of $7.25 an hour since 2009.
While cities and states across the country have raised the minimum wage within their borders to $15 an hour and beyond, a number of red states base their wage floor on the federal minimum, leaving low-wage workers in rural areas and economically depressed cities struggling to pay for basic needs. Since 2016, at least 27 states have passed so-called “pre-emption” laws that prevent city governments from raising the minimum wage for their residents.
Jayaraman said Trump’s dubious comments about taxes paid by tipped workers should be a wakeup call for Democrats.
“Democrats actually have policies and a history of supporting these measures — and there is no reason why they shouldn’t be shouting the need for living wages from the rooftops,” she said.
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