How would banning taxes on tips actually work?
Briefly

Both Donald Trump and Kamala Harris have expressed a desire to eliminate taxes on tipping, signaling a rare point of agreement between the two candidates. However, this seemingly beneficial move raises concerns among economists about the potential for abuse without proper checks and balances in place. The introduction of tax-free tipping could lead to complications in ensuring that this policy does not result in unintended consequences such as wage theft or misreporting of earnings.
The proposal to end taxes on tips appears attractive, yet economists emphasize the necessity of implementing robust guardrails. Without these safeguards, there's a tangible risk that the policy may be exploited by both employers and servers. For example, workers might underreport their income to benefit from a tax-free status, or employers might use this as an excuse to lower base wages. Establishing clear regulations could help mitigate these risks and ensure that the policy serves its intended purpose.
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