In Nevada, where hospitality rules, tipping isn’t a Reuters issue

By Howard Schneider and Ann Saphir

LAS VEGAS/RENO, Nevada (Reuters) – After two decades of working as a union bartender in Reno, Nevada, Kristie Strejc has the comfort of job stability, her pick of the best shifts and, unlike many in the hospitality industry, enough income that they would actually benefit from the plans proposed by both US presidential candidates to exempt tips from federal income tax.

But that doesn’t sway a vote, which she said is solid for Vice President Kamala Harris, the Democratic nominee who has the support of Nevada’s powerful Culinary Workers Union Local 226 and who in recent polls leads Republican challenger former President Donald Trump , in this sense. battlefield condition.

“I’m at a point where I could either go on ‘this’ vacation or buy ‘this’ for the house…I could probably do a little more of both if I had that money in my pocket.” it. he said when asked in an interview last month about the prospect of a tipped income exemption. “It would be a bonus, but I won’t vote because of one thing.”

Proposals to exempt old-age incomes from federal taxes came as Harris and Trump use competing economic proposals in areas such as tariffs and taxes to compete for votes in various constituencies, a strategy Trump has since expanded to include a tax exemption for overtime payment.

Some ideas are expensive. The Committee for a Responsible Federal Budget, a nonpartisan public policy organization, recently estimated that eliminating overtime taxes would reduce government revenue by $1.7 trillion from 2026 to 2035.

At least in Nevada, however, where the tipped hospitality industry still comprises more than a fifth of jobs, the proposal to exempt tips from taxes landed with little shrugs.

David Schmidt, chief economist for the Nevada Department of Employment, Training and Rehabilitation, said the state had about $95 billion in annual wages reported in a quarterly Bureau of Labor Statistics wage census in 2023. He estimates that no more than about 1.5% was from tips.

“It’s nothing, but it’s nowhere near the lion’s share,” he said. “I don’t think you’re going to see a huge impact. … It’s kind of a nice person-to-person thing.”

THE PROBLEM OF THE WORKING CLASS

Jeremy Gelman, an associate professor of political science at the University of Nevada, Reno, said he interpreted Trump’s proposal as an attempt to “sow doubt” among the roughly 60,000 members of Culinary Workers Union Local 226 and Bartenders Union Local 165 , whose well-organized voter mobilization program is “really effective when it’s on,” as it was for Harris.

The fact that both candidates made the bid removes the advantage for either of them, especially when “the economy is doing well … It’s not the best, but it’s not in a recession,” he said.

Ted Pappageorge, secretary-treasurer of the Culinary Workers Union, said there is not much credence to Trump’s proposal on an issue the union official sees as more complicated than a no-tax-on-tips approach might reflect. He sees this as tied to broader national issues, such as the sub-minimum tipped wages that are paid in many states and how best to help lower-income families who may not pay taxes but need help to cover their basic expenses.

“We’ve been fighting for 30 years for fair taxation of tips,” Pappageorge said in an interview last month, noting that tips are not the same as a promised wage for an hour’s work, but a gift at the customer’s discretion that can cause hourly earnings to vary widely.

While Nevada is one of seven states that do not allow employers to tip workers less than minimum wage, he said the union still views the issue as part of a larger set of questions that figured in Harris’ endorsement.

“It’s a working-class voter issue,” Pappageorge said. “You could see a package that raised the minimum wage and maybe didn’t eliminate the tip tax, but reduced it or something.”

LIMITED IMPACT

The Internal Revenue Service has not released detailed estimates of tip earnings since 2018, when 6.1 million workers reported $38.3 billion in Social Security taxes.

Recent research from Yale’s Budget Lab, a nonpartisan policy think tank, estimated that only 3 percent of taxpayers nationwide would qualify for a tip earnings exemption, with many others who collect tips making too little to owed federal taxes.

The exact impact, however, would depend on the details of the changes to the tax code and how workers and employers respond.

Harris suggested the exemption should have an income cap, a detail that would reduce the effect on the federal deficit but further reduce the number of workers who benefit. Regardless of whether the tax change was approved, economists would look for evidence of how behavior has changed and whether, for example, the guaranteed wage is reduced by employers if their workers received a “boost” through the tax break.

“Both camps see their proposals as a way to improve the economic situation of low-wage workers,” Brookings Institution researchers Ian Berlin and William Gale said in a recent analysis. “We agree that this is an important goal, but there are much better ways to achieve it,” including changes to the minimum wage or expanding child care or earned income tax credits.

“Exempting tips from taxation does nothing to help most low-income workers and may do nothing for many tipped workers,” they wrote.

“A LITTLE MORE”

Mike Bosma, a Reno-based CPA and Trump supporter, said the spiked earnings exemption was “vote-grabbing” by both candidates when they believe the focus should be on how inflation increased and led to high interest rates that put pressure on small businesses. the owners in particular.

“It hurt a lot of people,” he said, adding that he held Harris and President Joe Biden accountable for not doing more at this point to try to curb the price hike.

In Las Vegas, Rocelia Mendoza gathered with colleagues at the Culinary Union Hall one afternoon last month to prepare for a day of fighting, despite the sweltering heat, to encourage fellow union members to vote for Harris .

A waitress at a casino restaurant, she said the fees took “too much” out of the just over $16 an hour she earns and she would like to “make a little more money for my family.”

But she didn’t trust Trump to deliver.

“My sister, my niece, my husband, my whole family supports Kamala Harris,” Mendoza said.