Former President Donald Trump is seeking to sway voters in Nevada with his pledge to wipe out taxes on tipped wages if elected, but whether his vow will help him win the state in November remains to be seen.
Trump’s surprise announcement came during a Sunday rally in Las Vegas in what is seen as a direct appeal to voters in the state, as Nevada’s economy is driven by tourism thanks to the gambling and entertainment destinations of Las Vegas and Reno.
“This is the first time I’ve said this, and for those hotel workers and people that get tips, you’re going to be very happy,” Trump said. “When I get into office, we are not going to charge taxes on tips — on people making tips.”
Some strategists and advisers agree that Trump’s promise of tax-free tips will help move the needle in the Silver State.
“It’s such a politically potent move on Trump’s part because it’s as direct, unambiguous, and as transactional as you can get,” Kevin Madden, a senior adviser to Mitt Romney’s 2012 presidential campaign, said. “For all the talk of ‘campaigning in poetry and governing in prose,’ Trump just skips right to the ‘elect me and I’ll give you what you want’ part.”
The pledge also hits at weaknesses of President Joe Biden: the economy and the cost of living.
“From the political perspective, anything that can have impacts on the margins matters in this extremely close election,” Republican strategist Christian Ferry said. “With economic concerns dominating the public’s mindset, a targeted appeal like this to a smaller voter segment is meaningful. It directly impacts the pocketbooks of those voters; that makes it meaningful to them.”
Practical questions remain, perhaps most notably whether or not Trump could fulfill the promise even if elected, as the president does not have the power to influence taxation on tipped income. Trump’s campaign told the Washington Examiner that he plans to ask Congress to make the change, adding that Biden has “aggressively stepped up the IRS going after tip workers,” referring to the expansion of the IRS under Biden’s Inflation Reduction Act.
The White House has previously denied that the expansion of the IRS would affect those making under $400,000 a year.
But politically, the Trump campaign hopes the pledge to eliminate tip income taxes can get him over the edge. Nevada has gone blue in every election since 2008 and Biden won it by a little more than 30,000 votes in 2020, though Trump is ahead by about 5 points in the RealClearPolitics voting average for this year’s election.
By contrast, the Biden campaign has pushed for raising the tipped minimum wage to be in line with the regular minimum wage and for increasing minimum wages generally. However, any income earned through an hourly wage would be subject to taxation.
Service industry unions such as the Service Employees International Union have a major presence in Nevada and rallied against Trump ahead of his appearance.
“For decades, the culinary union has fought for tipped workers’ rights and against unfair taxation,” Culinary Union Secretary-Treasurer Ted Pappageorge said of Trump’s proposal. “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.”
If elected to office again, Trump would have a chance to oversee congressional lawmakers rewriting tax policy when much of the former president’s tax legislation expires in 2025. If the GOP can maintain its majority in the House and flip the Senate, Trump could have a better chance at seeing service tips-related legislation go through.
Gerald Friedman, a University of Massachusetts Amherst economics professor, said the real-world impact of the idea would not be large even if the policy went into effect.
“Tipped wages are already undertaxed. There’s a lot of fraud going on there because it’s one of the places where there’s a lot of cash,” he said. “People should pay taxes on their income. You could argue that waiters and waitresses are low paid and so they have a low tax rate also. But the basic principle is that regardless of your income, you should be paying taxes.”
Friedman explained that because workers earning tipped wages do not tend to earn very high incomes, they usually do not pay much in income taxes, meaning the impact both on them and on federal coffers would not be large.
That doesn’t mean it won’t make an impact on the campaign trail.
Earlier in the same Sunday rally, Trump said the Democratic Party runs on open borders and high tax rates, saying they know they “can’t get elected like that so they make up stories,” referencing a report that Trump called service members who were buried in a World War I cemetery “suckers” and that the cemetery was “filled with losers,” which Biden sometimes mentions on the campaign trail.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Trump then made his own promise to cut taxes on Nevada’s service workers.
“Those people that have jobs in restaurants, whatever the job may be, a tipping job, we’re not going after them for taxes anymore,” Trump said. “I announced that for the first time, first time I’ve brought it up, first time anyone has brought it up. I think it has never been brought up before, and I also think it’s very appropriate.”
