No Tax on Tips: Will Donald Trump Keep His Word?

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Donald Trump, during his 2024 campaign, frequently talked about a fairly radical taxation proposal: “No tax on tips.” 

The proposal was a push to earn the votes of people who work for tips, everyone from waiters and bartenders to golf caddies. In a prominent social media ad, Trump attorney Alina Habba was seen at a restaurant table, encouraging Trump fans, while dining out, to leave a “no tax on tips” sticker for their server. Sen. Ted Cruz (R-TX) even introduced legislation called the No Tax on Tips Act, although it did not move in last year’s Congress. 

The idea was so popular that Trump’s Democratic opponent Kamala Harris endorsed it as well, although how the proposals worked was slightly different. But now that Trump is returning to office, there’s little indication that delivering on the “no tax on tips” promise is anywhere close to the top of his agenda. 

News stories in recent weeks about the Trump economic agenda, and what might be passed by Congress, almost invariably don’t mention the idea, in favor of the questions of whether to prioritize immigration policy or tax cuts, whether that will be done in one bill or two, and how Trump can get that agenda through Congress.

Extending Trump’s first-term tax cuts appears a much higher priority than changing how tips are taxed. 

Per a CNN report Thursday, that “no tax on tips” proposal is “trickier than it sounds.” 

For one thing, many tipped workers don’t make enough money to qualify for the federal income tax. 

“While not every tipped worker meets the threshold for owing income taxes, every worker in America pays payroll tax on their first dollar of income,” CNN said. “Trump has briefly mentioned eliminating payroll taxes on tips; while that would ensure that every tipped worker gets some benefit, it also raises the cost and brings up more complicated issues.” 

NBC News, in a report last summer, saw this coming. 

“It’s unclear whether the election-year talking point will materialize as a serious policy plan on Capitol Hill. Several influential Republicans told NBC News they’re skeptical of the idea, citing the rising national debt and questioning whether it would be fair to earners who don’t make tips.”

“I don’t know about just making a unilateral decision about tips versus focusing on workers generally,” Rep. Chip Roy (R-TX), a “fiscal hawk” who has sometimes resisted Trump on those grounds, told NBC at the time. “Like, why would you favor tip-earners versus another person who makes similar wages? … That might even pose some legal questions in terms of how you’re treating one person versus another.”

With Trump holding close to a bare minimum majority in the House, he can’t spare the votes of Roy and people like him who are skeptical of the “no tax on tips” idea. 

Then there’s the idea that if a “no tax on tip” regime came into being, there would likely be a change in the definition of what a “tip” is- and employers would act accordingly. 

A Forbes analysis last September described not taxing tips as “a bad idea with a long history.” A separate Forbes column called the proposal “good politics, but bad policy.” 

“In tax policy, we evaluate proposed reforms by how well they promote equity, efficiency, and revenue,” Steve Rosenthal, of the Urban-Brookings Tax Policy Center, wrote in the latter piece. ‘No taxes on tips’ fails all three tests by singling out certain taxpayers for relief but not others similarly situated; distorting compensation arrangements and labor markets; and losing substantial revenue, potentially hundreds of billions of dollars in the first 10 years.”

Author Expertise and Experience:

Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter