By Howard Schneider and Ann Saphir
LAS VEGAS/RENO, Nevada (Reuters) – After two decades working as a union bartender in Reno, Nevada, Kristie Strejc has the comfort of job stability, her choice of the best services and, unlike many in the hospitality industry, enough income that she would actually benefit from plans by both US presidential candidates to exempt tips from federal income tax.
But that won’t affect a vote she believes is certain for Vice President Kamala Harris, the Democratic candidate who has the backing of Nevada’s powerful Culinary Workers Union Local 226 and who in recent polls has beaten former President Donald Trump, the Republican challenger. , leads in this state of the battlefield.
“I’m at a point where I could either go on ‘this’ vacation or buy ‘this’ for the house… I could probably do a little more of both if I had that money in my pocket,” she says. said when asked in an interview last month about the prospect of a tip income exemption. “That would be nice, but I’m not going to vote because of one thing.”
Proposals to exempt tip income from federal taxes emerged as Harris and Trump used competing economic proposals in areas like tariffs and taxes to compete for the votes of different constituencies, a strategy that Trump has since expanded to include a tax exemption for overtime.
Some ideas are expensive. The Committee for a Responsible Federal Budget, a nonpartisan public policy organization, recently estimated that eliminating overtime taxes would reduce government revenues by $1.7 trillion between 2026 and 2035.
But in Nevada, where the tipped-heavy hospitality sector still accounts for more than a fifth of jobs, the proposal to exempt tips from taxes has met with at least some shrugs.
David Schmidt, chief economist for the Nevada Department of Employment, Training, and Rehabilitation, said the state had reported about $95 billion in annual wages in 2023 to a Bureau of Labor Statistics quarterly payroll census. He estimates that no more than about 1.5% came from that. from tips.
“It’s not nothing, but it’s not close to the lion’s share,” he said. “I don’t think you’ll really see any major impacts… It’s a person-to-person thing.”
WORKING CLASS ISSUE
Jeremy Gelman, an associate professor of political science at the University of Nevada, Reno, said he viewed Trump’s proposal as an attempt to “sow doubt” among the roughly 60,000 members of the Culinary Workers Union Local 226 and Bartenders Union Local 165, whose source The organized voter mobilization program is “really effective when it is on,” as it has been for Harris.
The fact that both candidates made the bid weakens the advantage for either of them, especially when “the economy is doing well… It’s not the best, but it’s not in a recession,” he said.
Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union, said little credence was given to Trump’s proposal on an issue that union officials see as more complicated than just a no-tax approach on tips could reflect. He sees this as tied to broader national issues, such as the tips workers receive below the minimum wage in many states, and how best to help lower-income families who may not pay taxes but need help covering the basic expenses.
“We have been fighting for 30 years about fair taxation of tips,” Pappageorge said in an interview last month, noting that tips are not the same as a promised wage for an hour of work, but a gift at the customer’s discretion that leads to problems can lead. hourly wages vary widely.
Although Nevada is one of seven states that do not allow employers to pay less than minimum wage to tipped workers, he says the union still views the issue as part of a broader set of questions that contributed to the passage of Harris.
“It’s a working-class voter problem,” Pappageorge said. “You could see a package that raised the minimum wage and maybe didn’t eliminate the tip tax, but lowered it or something like that.”
IMPACT LIMITED
The Internal Revenue Service has not published detailed estimates of tip income since 2018, when 6.1 million workers reported $38.3 billion in tip income for Social Security payroll tax purposes.
Recent research from Yale’s Budget Lab, a nonpartisan policy research center, estimates that only 3% of national taxpayers would benefit from a tip exemption, while many others who collect tips earn too little to pay federal taxes.
However, the exact impact would depend on the details of the tax law changes and how employees and employers respond.
Harris has suggested that the exemption should have an income limit, a detail that would reduce the effect on the federal deficit but further limit the number of workers who benefit from it. For whatever tax change was approved, economists would look for evidence of how behavior changed, and whether, for example, employers’ guaranteed wages are reduced if their workers get a “raise” through the tax holiday.
“Both camps see their proposals as a way to improve the economic position of low-wage workers,” Brookings Institution researchers Ian Berlin and William Gale said in a recent analysis. “We agree that this is an important goal, but there are much better ways to achieve it,” including minimum wage changes or expanded child care or earned income tax credits.
“Exempting tips from taxation does nothing to help most low-income workers, and perhaps little to many tipped workers,” they wrote.
‘A LITTLE LITTLE MORE’
Mike Bosma, a Reno-based certified public accountant and Trump supporter, said the tip income exemption represented a “vote pandering” from both candidates, while he believes the focus should be on how inflation is skyrocketing has risen and led to high interest rates that have put pressure on small businesses. owners in particular.
“It’s hurt a lot of people,” he said, adding that he holds Harris and President Joe Biden responsible for not doing more to curb price increases at this point.
In Las Vegas, Rocelia Mendoza gathered with colleagues at the Culinary Union Hall one afternoon last month to prepare for a day of knocking on doors, despite the stifling heat, to encourage other union members to vote for Harris.
As an assistant waitress at a casino restaurant, she said taxes took in “too much” of the just over $16 an hour she makes, and that she would like to “make a little more money for my family.”
But she didn’t trust Trump to deliver results.
“My sister, my granddaughter, my husband and my entire family support Kamala Harris,” Mendoza said.
(Reporting by Howard Schneider in Las Vegas and Ann Saphir in Reno; Editing by Dan Burns and Paul Simao)
