Talk about inane political brouhahas: Among this week’s silliest issues is that Kamala Harris and Donald Trump appear to agree on a relatively minor tax point — exempting tip earners from having to pay tax on those earnings.
We will get to the pros and cons in a minute, but in this case, the politics seems to come first — if for no other reason than the entire proposal seems born of a desire to win over voters in battleground states like Nevada with a quick fix. Let’s call it pandering, because that’s what it is.
Nevada has upwards of 350,000 largely immigrant, working-class hospitality employees, who depend on tips to make the weekly difference in pay. They represent the most highly concentrated group of tipped employees nationwide. Many, but certainly not all, earn enough to have to pay taxes on off-the-books financial help. Indeed, across the country, employees reporting tips, like the 2.9 million waitresses that the Bureau of Labor Statistics tracks, often don’t report enough income to have to even pay income tax. In this story, however, they are would-be voters whose support each side wants to capture.
So, when Trump heard from a waitress in Nevada that it would be a good idea for him to waive any income tax on her gratuities, Trump picked it up in his stump speeches as an example that he would save working class jobholders money. Then, a few days later, Harris picked up on the same idea — apparently without consultation with, say, Democratic senators trying to negotiate a bipartisan deal about tax cuts or the 60,000-member Culinary Union — and said that she too would waive such income tax.
But rather than celebrate that political opponents might agree on a subject, whether good policy or not, Trump used it to lash out at Harris for copying the idea that he had stolen from a single waitress, as if ideas are patentable.
All week, we’ve been hearing about maneuvering and positioning to blunt either candidate’s advocacy of no tax on tips as being anything resembling a reasoned, researched outcome of tax policy deliberations. Instead Democrats and union leaders in Nevada have been arguing that Trump can’t be trusted to follow through on the promise, and Harris, who added an income cap for eligibility, is fending off her own economic advisers about whether this reflects a good outcome for the country.
What It Says About Us
There’s a statement in all this about the failure of opponents to congratulate or praise the other for having an idea that lives in the common ground of compromise. Thinking that way might lead to outlines for agreement about immigration and border policy, for example, where Trump’s belligerence prompted rejection of a bipartisan deal that encompassed most of what Republicans have sought for years. Trump could wake up and stop vowing to kill the very popular Obamacare health plans just because he derides its namesake while offering no alternative.
The issue itself is momentarily interesting. As usual, the idea arrived without time for a full bake, and there are no practical details.
By all accounts, tipping has been growing out of control, with automated I-Pad programs ready at the drop of a receipt to add 20% or more to any bill from food to taxis to self-service counters. The idea of tipping as an “extra” reward to a particularly helpful service provider has taken on a certain grim expectation that this is the answer to wages that remain consistently lower than desired.
Hospitality workers say they need the tips to live on, and that paying tax on a “reward” just makes life financially difficult. Who could blame them for saying so? Eliminating taxes on tips would not likely have a huge impact on individuals who — even if they report all their tips — disproportionately are not making enough to pay even minimum tax levels.
The Questions Persist
Policy experts are raising a host of questions. It sounds as if no one quite knows the direct financial impact of waiving this tax, but they see a bigger hit on the effect that doing so might have on wages altogether. Employers eager to encourage workers to get tips from customers would be loath to raise wages, for example, or could prompt some businesses to become more aggressive in soliciting tips from customers. That is a consequence that some have estimated will cost federal budgets between $100 and $200 billion over a decade.
Harris is all for raising the minimum wage, but tipped workers in some states can be paid as little as $2.13 an hour. Worker wages don’t appear in Trump speeches unless they are the “forgotten” whom only he can save. As a group, Latino voters seem this year’s designated darlings of the polling set, with many seen as disillusioned about high gas and grocery prices and persuadable.
There is an equity question as well, with tips serving as a kind of wedge with other low-income workers.
Significantly, it’s not clear what constitutes a “tip.” How about those concierge charges that we are seeing among some medical offices, or a stockbroker who has a helpful suggestion, or a real estate broker perceived as doing a good job? How about bankers’ bonuses or sales commissions or payment for “extra” service at a shop? The tax code already has different rules for different kinds of income like capital gains or investment interest loopholes that only benefit those with money to invest.
That’s why Harris wants to add income eligibility to the policy mix, though the haste of both candidates to embrace a raw meat tax waiver without some study and understanding is troubling all by itself.
In the end, of course, this is about the six Electoral College votes from Nevada. Whether the idea is sound policy, the politics of it are. The shame is that both candidates can’t praise one another for getting out a message aimed at helping people without falling on disagreeing about agreeing.
It’s a double pander from our presidential opponents. In reality, any such change in tax policy would have to be enacted by a perpetually split Congress.
The question: If the opponents agree, why not both work to make it so?
