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Trump and Harris plan to end taxes on tips. The reaction is mixed in Las Vegas

A MARTÍNEZ, HOST:

I'm in the swing state of Nevada this week, asking voters about the issues that matter most to them this election. Hospitality, gambling and entertainment are the economic engine of this state. A lot of the workers here in Las Vegas rely on tips to help pay their bills, so it's no surprise that former President Donald Trump chose a campaign rally in Las Vegas to make this announcement in June.

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DONALD TRUMP: For those hotel workers and people that get tips - you're going to be very happy because, when I get to office, we are going to not charge taxes on tips - people making tips.

MARTÍNEZ: When Kamala Harris made the same promise, she also did it in Las Vegas.

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VICE PRESIDENT KAMALA HARRIS: We will continue our fight for working families of America...

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HARRIS: ...Including to raise the minimum wage...

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HARRIS: ...And eliminate taxes on tips for service and hospitality workers.

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MARTÍNEZ: So what do the people who earn tips think?

MICHAEL WAGNER: My name's Michael Wagner. I'm a Las Vegas native. I'm a bartender.

MARTÍNEZ: He says he makes up to $120,000 a year and that at least 75% of his income comes from tips. His biggest tip ever? - $10,000, which was split with colleagues.

WAGNER: I'm not very invested into politics. I'm 41. I've never voted. This would definitely be the thing. If this was something that was going to actually get me to register, go out and actually do it.

KIMBERLI YELLE: My name's Kimberli Yelle. I am one of the servers here at Artesian Cellars Winery.

MARTÍNEZ: In Pahrump, 90 minutes west of Las Vegas, she told us she makes minimum wage, which is 12 bucks an hour here, and that 75% of her income is tips. She is skeptical about these campaign promises.

YELLE: I'm just worried about the back end. What other taxes are they going to raise to make up for losing that taxed income?

ALLAN SCHLEICH: Hi, I'm Allan Schleich. I'm a bartender in the Arts District, Downtown Las Vegas. That would definitely help with rent, groceries. You know, maybe I'd be able to go to the dentist for once.

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MARTÍNEZ: He says he plans to vote Democratic, but not because of tips.

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SCHLEICH: As Democrats always do, they tend to pander to the left and the working class without actually fulfilling their promises, while the right wing definitely just only supports the rich.

LASHAWNDA PARRISH: I'm Lashawnda Parrish (ph). I'm a Uber and Lyft driver in Las Vegas, Nev.

MARTÍNEZ: She says she makes around $100,000 a year, about 20% in tips. She likes the candidates' proposal on tipping, but it isn't affecting her vote. She says she plans to vote for Kamala Harris.

PARRISH: I would say it would be on my radar. It wouldn't be, like, one of the most important issues to me. I'm a independent, and I tend to vote both Republican and Democratic - split my vote sometimes.

SUMMER BUNNY: My name is Summer Bunny. I'm an adult entertainer here in Las Vegas.

MARTÍNEZ: That is a stage name. She asks that we not use her legal name for safety reasons. She says she makes between 10- and $20,000 a month. Her biggest tip so far? - a thousand bucks. She told us she would vote for Harris because of her support of reproductive rights. She wasn't impressed, though, with the proposals on tips.

SUMMER BUNNY: All my income is tips. I understand that there has to be order, like, in some way. So I can get away without paying taxes, which doesn't seem fair at the same time.

MARTÍNEZ: All right. So is killing the income tax on tips something that could actually happen? I'm here with David Wessel, director of the Hutchins Center at the Brookings Institution, to hear about the economics behind this campaign promise.

So David, we know the President cannot change tax law without Congress. But if Congress voted to exempt tips from taxes, who would benefit?

DAVID WESSEL: Well, not very many people. There are, of course, a lot of tip workers in Las Vegas. Ernie Tedeschi, an economist at the Yale Budget Lab, estimates about 2.5% of all workers in the U.S. - waiters, bartenders, hairdressers - routinely get tips. Maybe it's a little higher if you add in the growing number of Uber drivers and DoorDash drivers. But even among the lowest-paid workers, very few are in jobs where tipping is common. Moreover, nearly 90% of all tip workers make so little money that already they don't pay any federal income taxes under current law.

MARTÍNEZ: Though, you know, David, most of the tip workers we spoke to were skeptical or pessimistic, like another shoe would drop - like, nothing good could happen or could come out of this. So they wondered whether taxes maybe would be raised to offset. What do you think?

WESSEL: Right. So there are two bills already in Congress to exempt tips from taxes - nine cosponsors in the House, 10 in the Senate, mostly Republicans, but the three Democrats from Nevada are on the case. They don't say how they're going to make up the money. If this actually happens - and I don't think it's likely - if it does happen, it'll be rolled into a big tax bill next year. And it's not clear at all whether that will be offset by higher taxes or spending cuts somewhere.

MARTÍNEZ: What about employers? What are employers likely to do if tips are exempt from taxes?

WESSEL: Well, certainly, some employers are simply going to pay their workers lower wages since they know the employees will be able to keep more of their tip income. But another issue is likely to come up - and one of your people you talked to raised this - is the question of fairness. Why should a waitress who makes 30 grand a year in wages and tips pay less in federal taxes than a cafeteria worker who doesn't get any tips? And that bartender you talked to who said he makes 120 grand a year - 75% of it from tips - is that really what President Trump and Kamala Harris have in mind - giving someone like him a tax cut? Indeed, the Harris campaign tells reporters that they're going to limit this to people who make up to 75 grand.

MARTÍNEZ: Polls in Nevada show that Harris and Trump are pretty much dead even here. They both made those announcements here - just a way to get some votes - to get some extra votes, David?

WESSEL: Yeah, it seems to me that the only rationale for this proposal is to win votes in Nevada. And I suspect that Kamala Harris isn't in love with this idea, but she figured she would match President Trump and then move on. If the goal was really to help hard-pressed, low-wage workers, there are more efficient ways to do it. Make the Earned Income Tax Credit bigger. Expand the Child Tax Credit. Raise the minimum wage, which, by the way, all - Harris wants to do all those things.

I don't think this is the big issue that Nevada voters are going to work a vote on. And with both President Trump and Vice President Harris saying the same thing, it's hard for me to see how many votes this will swing. But in a close election, you had one guy who says he's going to register for vote for the first time if he thinks this is going to really happen.

MARTÍNEZ: David Wessel, director of the Hutchins Center at the Brookings Institution - David, thank you.

WESSEL: You're welcome.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Corrected: September 26, 2024 at 3:35 PM EDT
An earlier audio version of this story incorrectly indicated that 90% of tipped workers make so little they don’t pay taxes. In fact, an estimated 40% of tipped workers make so little they don’t pay taxes.






A Martínez
A Martínez is one of the hosts of Morning Edition and Up First. He came to NPR in 2021 and is based out of NPR West.