Republican Reps. Matt Gaetz of Florida and Thomas Massie of Kentucky introduced a bill to repeal the tip tax after former President Donald Trump said it would be his “first act” if re-elected.
legislationThe bill, titled the “Tip Tax Free Act of 2024,” aims to eliminate federal income and employment taxes on service workers’ tips.
“As the cost of living continues to rise, the hard-working men and women in the service industry, many of whom may have second jobs to make ends meet, should be able to keep every penny they earn in tips,” Gaetz said in a statement.
Massie echoed Gaetz’s comments, saying “taxing tips is regressive and goes against American tradition.”
“But now, digital payments enable governments to tax any transaction, including transactions that were not previously taxed,” he added.
The announcement came after Trump said at a rally in Las Vegas that hotel workers and other service industry workers “would be very happy” if he were re-elected this fall because “I wouldn’t tax tips.”
The former president said the tip tax has been “controversial for years and years and years.”
Any changes to taxation of tip income would require approval from Congress, as lawmakers consider the nation’s tax code next year after President Trump’s 2017 tax cuts expire.
Currently, service workers file taxes with the IRS, which considers tips to be regular taxable income.
Republican senators have praised Trump’s idea, with Sen. Kevin Cramer (R-Ill.) calling it “genius.”
But not everyone is excited: The Committee for a Responsible Federal Budget estimates that cutting the tip tax could reduce federal revenues by $150 billion to $250 billion over 10 years.
