TIPPING OUT: Vice President Kamala Harris declared her support Saturday for exempting tips and gratuities from federal income taxes — cribbing one of former President Donald Trump’s populist appeals for this election cycle. “When I am President, we will continue our fight for working families of America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers,” Harris said at a large rally in Las Vegas. The move comes less than a day after the Culinary Union, an enthusiastic backer of the proposal and a potent political force in Nevada, endorsed Harris and her ticket-mate, Minnesota Gov. Tim Walz. Trump quickly decried Harris’ embrace of the policy writing on social media that “[s]he has no ideas, she can only steal from me.” The idea is being pitched as a boost for legions of bartenders, restaurant service employees, hotel cleaning staff and other lower-wage workers in the service sector. The cost remains somewhat fuzzy, though the Committee for a Responsible Federal Budget estimated Trump’s plan could run north of $150 billion over a decade. However, some left-leaning advocates and tax policy experts contend that it, at best, would be marginally effective and, at worst, threatens to overshadow other plans that could provide a much greater benefit — and not just for one type of worker. They shared their hesitations with Morning Shift prior to Harris backing the same policy. Many tipped workers already do not make enough to pay federal income tax and those that ultimately need to typically pay relatively little, though they are also subject to state levies as well as federal payroll taxes — which in theory could also be exempted by lawmakers. “So you’re promising a benefit to people who don’t benefit anyway,” Howard Gleckman, a senior fellow at the Tax Policy Center, told Shift. “There are not a lot of tax upsides.” But cutting out payroll taxes could also hurt workers in the long run by hampering their eligibility for Medicare and Social Security, Gleckman said. Plus, it could incentivize a further proliferation of tipping opportunities — something that consumers can already find a bit grating. Progressive outfits like the Center for American Progress have argued that the exemption would pale in comparison to things like reviving the expanded earned income tax and child tax credits. And One Fair Wage continues to push state and local governments to phase out use of a lower minimum wage for tipped workers, as more than a half dozen states and D.C. have done. It also issued a report last month that argued against a tipping exemption proposed by Sen. Ted Cruz (R-Texas) that echoed Trump’s (and now Harris’) plan. “It was a smart move to try to pander to the fact that cost of living is a top issue in every poll,” OFW President Saru Jayaraman said. “Workers are not going to be fooled.” However the influential restaurant industry vastly prefers exempting tips from taxes as a way to boost workers’ pay than alternatives like ending the tipped minimum wage. “We appreciate that the idea of eliminating taxes on tips continues to keep restaurants and tipped servers in conversations happening on the Hill and around the election,” Sean Kennedy, a National Restaurant Association spokesperson, said in a statement to Shift. “Tax policy plays a major role in the success of the restaurant industry, so we’ll continue to work with Congress on this and other common-sense tax proposals that will support restaurant vitality in every community in America.” GOOD MORNING. It’s Monday, August 12. Welcome back to Morning Shift, your go-to tipsheet on labor and employment-related immigration. Send feedback, tips and exclusives to nniedzwiadek@politico.com and lukenye@politico.com. Follow us on X at @NickNiedz and @Lawrence_Ukenye.
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