Last Updated on 3 months by Ashley Michael
WASHINGTON—Tax policy experts warned Wednesday that President Donald Trump’s campaign promise to eliminate taxes on tips faces significant implementation challenges and could create unintended economic consequences.
The Tax Foundation, a nonpartisan think tank, released an analysis stating the proposal would reduce federal revenues by $150-200 billion over 10 years.
Senior economist Erica York said the plan could prompt employers to restructure compensation packages.
Workers in non-tipped industries might see their base wages converted to tip-based systems,” York said in a statement Wednesday.
Restaurant industry groups expressed mixed reactions. The National Restaurant Association declined to endorse the proposal, citing concerns about enforcement complexity.
Labor economists warned the policy could worsen income inequality between tipped and non-tipped workers.
University of California Berkeley professor Michael Reich said the plan “creates arbitrary distinctions in the tax code.
The proposal would require congressional approval. Senate Finance Committee members from both parties have not committed to supporting the legislation.
IRS officials told lawmakers Tuesday that implementing the change would require significant administrative restructuring and new reporting systems.
Trump first announced the no-tax-on-tips proposal during his 2024 campaign. The plan would affect approximately 4 million workers nationwide who report tip income