Especially in today’s political climate, it’s rare that Republicans and Democrats agree on an issue. Whoever wins in 2025, tax policy will be at the top of the congressional agenda next year when the Trump-era tax cuts expire. But when it comes to taxing tips, it could be an issue that keeps politicians on one side and experts on the other.

Both candidates remained vague about the “how” of the proposal to eliminate the tip tax. But is this proposal realistic?

To find out, Scripps News interviewed tax expert Steven Rosenthal, who said, “When I hear the political parties agreeing, I reach for my wallet because the only agreements we seem to be making these days are tax giveaways. We tax policy experts always feel uncomfortable during election campaigns – the so-called fool’s season. It’s one of those proposals that sounds good and may have political appeal, but it scores very poorly on our tax policy track record.”

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Rosenthal explains that from a tax policy perspective, this idea is a loss-maker – both in terms of fairness, efficiency and revenue.

“Well, this is a pretty big increase. The best estimates are about $100 billion over the 10-year Congressional budget period, and that’s a big number, and that’s a static number that doesn’t even take into account all the losses that would occur as more and more workers reclassify their tips and make them tax-free from wages,” he said, adding that the cuts would increase the deficit while helping only a small portion of workers.

According to the Budget Lab, a nonpartisan policy research center, there were 4 million workers in tipped jobs in the United States last year, or about 2.5 percent of all workers. More than a third of them had incomes so low that they already paid no federal income tax.

SERENA MARSHALL OF SCRIPPS NEWS: Would a better solution be to raise taxes on corporations to pay people sustainable, living wages?

STEVEN ROSENTHAL: I believe that a large portion of the service workforce does not make enough to pay income taxes, so if you were thinking about a proposal that tried to favor lower and middle class workers more than higher income workers, you really wouldn’t bet on tip exemptions. You would bet on raising the minimum wage.

The national minimum wage remains at $7.25 per hour and was last adjusted in 2009. Adjusted for inflation, this is 29 percent lower than it was 50 years ago.

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