Trump and Harris Both Back 'No Taxes on Tips.' What Do Culinary Workers Think?
They’re skeptical it can be done, but hopeful for tax relief — and a minimum wage increase.
by Paul Blest, More Perfect Union
During a rally in Las Vegas last week, Vice President Kamala Harris joined former President Donald Trump in explicitly endorsing a proposal to end taxes on tips. “When I am president, we will continue our fight for working families of America, including raising the minimum wage and eliminating taxes on tips for service and hospitality workers,” Harris said.
The state where Harris and Trump both made this pledge — Nevada — wasn’t an accident. The hospitality sector dominates the swing state, which has the highest concentration of tipped workers in the country. And there are political considerations as well: over the past several decades, the union representing these workers, the Culinary Union Local 226 of UNITE HERE, has built a massive political machine that’s helped deliver victories to Democrats in the state over the past several election cycles. Of the union’s 60,000 members, roughly a third are tipped workers.
Unlike Trump, Harris also endorsed raising the minimum wage — something Local 226 workers and leaders think is just as key to getting more money into the pockets of workers. The Culinary Union sees raising the subminimum wage and reducing the tax burden for tipped workers as the same fight, Secretary-Treasurer Ted Pappageorge told More Perfect Union.
“If there's any discussion about tips that should be treated differently than wages, then you got to deal with the subminimum wage,” Pappageorge said. “The idea that folks can work for $2.13/hour is just ridiculous.”
“The cost of living has gone way high. You definitely have to have a fair wage,” Matthew Seevers, a bartender at the Bellagio, told More Perfect Union. “For them to also eliminate the taxes on tips…it helps our economy. It helps people put more money in their pocket.”
After Harris made the remark at her rally, Pappageorge said in a statement that the Vice President “acknowledged the hard-working men and women of the hospitality industry” by committing “to raise the minimum wage across the country and fight to end taxes on tips.” But when Trump came out with his pledge, “folks were skeptical,” Pappageorge said.
“We never had any president or presidential candidate talk about supporting working class folks on their tips, and now we got two candidates,” Pappageorge said. “But Trump really doesn't have any credibility... With Trump, it's kind of a joke, but it's a serious issue for a lot of workers here in Nevada.”
Tipped workers have good reason to be dubious: as Trump prepared to leave office in 2020, his Department of Labor finalized a rule that would have allowed employers to keep hundreds of millions from tipped workers. (The Biden administration reversed this rule within a year of Biden taking office.)
‘It’s all about fairness’
The fight over taxes and tips goes back to 1982, when a tax increase ushered through by President Ronald Reagan (to counter the negative impacts of his 1981 tax cut) included a crackdown on tipped workers. Many employers in the Las Vegas gaming industry enter into agreements with the Internal Revenue Service to determine an estimate of how much their employees earn in tips, and employees who participate in the program are shielded from audits.
But after the Internal Revenue Service lowered the rate substantially in 2020 and 2021 to account for the impact of the pandemic, those rates skyrocketed in 2022, workers said. During a roundtable discussion last week with Rep. Steven Horsford (D-NV) and Pappageorge before Harris endorsed the proposal, workers expressed a desire to pay their fair share in taxes, as well as skepticism that eliminating taxes on tips could even be enacted — particularly in a second Trump term.
Instead, those workers said they viewed the slogan as an opening to a conversation about what they view as an overcorrection from the IRS. Steve Manriquez, a Local 226 member who works as a bellman at the Signature at MGM Grand, said during the roundtable that workers were losing an average of $200 per paycheck to tip compliance, which they ultimately were able to lower with the help of Legal Aid.
“We lost a lot of money. I had to get a second job,” Manriquez said, adding he doesn’t “really buy” the proposal to fully end taxes on tips. “We want to pay our fair share of taxes, but let’s be fair about it.”
Pappageorge said the IRS has “swung in the wrong direction” toward an overcorrection, and members are now being unfairly taxed.
“Nobody expects taxes to go away on tips,” he told More Perfect Union. “But we’ve been at this for 30 years. It’s all about fairness.”
Paul Sonn, the director of the left-leaning National Employment Law Project Action Fund, told More Perfect Union that “the part of [Harris’] proposal would that make the biggest difference in their lives isn't no taxes on tips, it's more her call for raising the minimum wage for tipped workers.”
Sonn said, however, that Culinary Union workers would uniquely benefit if federal income taxes on tips went away, in part because of the union. “They have a strong union, with contracts that give them middle-class lives,” he said. “The no taxes on tips policy would save them a little, because they are in the minority of tipped workers that pay an appreciable amount of federal income taxes.”
“But most tipped workers are working at the Applebee's in a state that doesn't have the high tipped worker wage minimum wage Nevada has,” he added.
Making below the minimum wage is ‘brutal’
Nevada is one of seven states where the subminimum wage has been eliminated and tip earners have the right to the same minimum wage as everyone else; the minimum wage in Nevada is $12/hour. Five states considered legislation to join them this year, and Chicago started a years-long phaseout of the tipped wage in July.
But the federal minimum wage for tipped workers has been $2.13 since 1991, and it remains that low in more than a dozen states. And though employers are legally required to make up the difference between the tips and minimum wage if the employee’s tips don’t, it’s usually up to the worker to monitor this. In 2022 the barbecue chain Famous Dave’s paid nearly $1 million to former employees in Maryland to resolve wage theft claims, after deducting a “tip credit” from workers’ pay that brought their earnings below the minimum wage.
Lori Scavnicky, a cocktail server at the Luxor in Las Vegas, said during the roundtable that she made the federal tipped wage as a restaurant server in Ohio and that it wasn’t enough to cover her bills. “It was brutal,” she said. “You didn’t ever make a paycheck, and it was hard to live on the tips you did make.”
Horsford, who is also the chair of the Congressional Black Caucus and a co-chair of the Labor Caucus, said this week he would introduce legislation to both end the federal income tax on tips and end the subminimum wage for tipped workers, while reportedly including provisions to prevent employers and wealthy earners from exploiting it.
The National Restaurant Association, an industry group, has lobbied extensively against raising both the minimum wage and the tipped minimum wage, funded in part by money taken from service workers for a ServSafe certification. The group has long argued that raising the minimum wage will place “undue harm” on businesses and hurt the workers who would see a pay bump.
The Culinary Workers, for their part, don’t buy it.
"Nevada has been doing this for a while now, and it has not hurt any of the business," Seevers, the Bellagio bartender, told More Perfect Union. "When people bring more money, they're able to spend more money...it helps the economy.”
"When you heard the Vice President say, in the same sentence, 'We're going to raise the minimum wage,' that means including tipped workers," Pappageorge said. "And we're going to stand up for no taxes on tips.”
“Our members think that, for the first time, we’re getting some real attention as to the issue of fairness.”