Donald Trump‘s proposal to eliminate taxes on tips has raised concerns, with a think tank warning it could cost up to $250 billion.
The nonpartisan Committee for a Responsible Federal Budget issued a report on June 16 predicting that Trump’s plan to remove taxes on tipped income by 2024 could have significant financial implications for the federal budget.
Currently, all tips received by employees, whether in cash or noncash form, are considered income and subject to federal income taxes.
The CRFB’s report estimates that exempting all tip income from federal taxes could lead to a $150 to $250 billion reduction in federal revenues over ten years, potentially more when accounting for behavioral effects.
The CRFB highlighted that if workers’ tips were to double, the policy could cost the federal budget up to $500 billion. This scenario is a hypothetical illustration, assuming wage adjustments due to the policy changes.
Trump expressed his support for the idea on Truth Social, emphasizing his stance on relieving service workers from tip taxes. While former Representative Ron Paul also proposed a similar idea during his 2012 presidential campaign, Trump has actively promoted his message by urging supporters to endorse him through tipping receipts.
Musician Kid Rock recently shared a receipt showing a generous tip and a pro-Trump message, in line with Trump’s suggestion for supporters to promote his no-tip-tax policy.