Trump wants to reduce tip taxation - that could be complicated
Trump wants to reduce tip taxation - that could be complicated
Cindy Kramer, 38 years old, works over 60 hours a week in four different jobs on Staten Island, New York, to take care of your child and make rounds. Two of these jobs are in the area of gastronomy where she works as a bartender.
Support for Trump's tax reform
How many in the service industry supports Kramer the promise of the designated president Donald Trump to abolish . Vice President Kamala Harris also supported this project with certain conditions, and the first steps have already been taken in the congress.
"Of course it would give me less stress to have a few hundred dollars more in my pocket," said Kramer. However, she is not sure whether she earns enough with her job as a bartender to pay federal taxes.
uncertainties in implementation
whether Kramer could actually benefit from these savings remains unclear. Since Trump is due to take office in January, only a small group of employees, which include restaurant employees, hotel employees, waiters, bartenders and hairdressers, would benefit from this tax relief. The reason for this is that a large part of these employees do not earn enough to pay federal taxes.
Trump had previously announced that he wanted to abolish income and wage taxes on drinking money. But there are still questions about how this could work specifically and whether it is possible to eliminate both types of tax. Trump has so far provided little information about the details of his plan.
election decisions and economic promises
The promises of tax relief were among the most important economic reasons, which is why some communities voted for Trump. Many Americans suffer from the currently high inflation, and Numerous promises Social security benefits were also very well received.
Nevertheless, it was the promise not to charge a tax on drinking money that left the most impression, according to Heidi Shierholz, President of the Economic Policy Institute. Economic experts told CNN that Trump could implement his promise, especially since various versions of this promise have already received cross -party support. Even bids Increase in the minimum wage.
criticism of the tax changes
However, critics point out that associated difficulties exist and that such a change would not help many low earners. Kramer himself is unsure whether she meets the prerequisites to benefit from the planned tax breaks."It's more than just a catchy slogan," said Shierholz. "It is much more complex than that."
Who benefits from tax abolition on drinking money?
Although the number is low, drinking plants in American society are very visible. In 2023, around 4 million people worked in professional areas that receive drinking money, which corresponds to about 2.5 % of the total employment, according to the Budget Lab of the Yale University, a political research center.
drinking gear pounds tend to be younger (teenagers make up 3 % of the total employment, but 13 % of the tips of the tip) and earn less.
This means that many earn too little to debt federal taxes - 37 % of the drinking pawns fell into this category in 2022, according to the knowledge of the budget.
effects in different states
John Seymour, the owner of the Sweet Chicks restaurant chain in New York City, said that full -time employees in his restaurant would probably earn enough to reach the income tax border. In a city like New York, however, many service staff only work part -time.
"The only impact that has (a tax abolition on drinking money) is a positive. More income for the staff is always an advantage for us," said Seymour. The minimum wage is not enough to pay the bills, he added.
in states such as Nevada, which have the highest proportion of drinking pawns in the United States and many are active in the catering trade, the effects could become more clearly visible. The proposal could also be comparatively inexpensive, unlike Trump's more comprehensive tax plans. While the extension of tax cuts from 2017 could cost around $ 4 trillion, the Yale University's budget estimate that the abolition of tax on drinking money over 10 years could cost between $ 60 to 200 billion.
complexity of social security issues
Although not every drinking gear pace exceeds the income tax limit, all employees in America pay wage taxes from the first dollar of their income. Trump has indicated in the past to abolish wage taxes on drinking money; While this would ensure that every drinking gel has a certain advantage, it also brings higher costs and raises more complicated questions.
The Republican Senator Ted Cruz from Texas introduced a bill entitled "No Tax on Tips Act" in July, which would enable employees to deduct drinking money that is paid in cash, by check or with a credit and debit card. However, this would not abolish the federal wage taxes that finance social security and medicar and are 15.3 %, with half of the employers paid.
effects on social insurance
The abolition of wage taxes could endanger the financial stability of social security and medicar. It is already predicted that social security could be insolvent by 2034, according to the social security authority. Trump and the congress would also have to pay attention to how the income calculation of the drinking gowns affects social security benefits, explained Ernie Tedeschi, director of the economics of the Budget Lab and former chief economist in the advisory committee of the White House in the bid administration. An exemption of drinking funds from social security taxes could mean that these income does not incorporate into the calculation of social security benefits, which would effectively shorten the services for these employees.
companies and employees could also find paths to exploit legislation, for example by changing commissions and bonuses as tax -free drinking money, provided that legal protective measures are not sufficiently available.
Alternative solutions for low earners in the service sector
Many economic experts who spoke to CNN advocated increasing the nationwide minimum wage for drinking gear. The minimum wage for drinking plants has not been adjusted since the 1990s, says Tedeschi.
The nationwide minimum wage for drinking gear pawns is $ 2.13 an hour, but they have to earn at least the nationwide hourly minimum wage of $ 7.25, or their employers have to compensate for the difference. Many states and municipalities have introduced higher minimum wages and minimum wages for drinking gel.
The union of the restaurants Local 226 in Nevada is committed to abolishing taxes for service and catering workers and at the same time lifting the nationwide minimum wage.
"If all drinking gears received a basic wage of $ 17 an hour, it would have much more influence than not paying any income tax on drinking money," said Shierholz.
The tax code is already complicated, added it. "If you want to help the working people, the political measures should be based on the level of your income and not in the way you earn," emphasized Shierholz.
Others indicate that this policy only benefits from a kind of low earner. In comparison between a waiter at Waffle House and a cashier at McDonald’s, Tedeschi notes: "Both are low-earners, both work in fast food service, but culturally we give it a tip, which means that it could benefit from this proposal."
Contributions by CNN authors Tami Luhby and Matt Egan flowed into this report.
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