No tax on tips: Donald Trump and Kamala Harris debate over tax policy

Report by Ahmad Abdallah, English adaptation by Yasmine Jaroudi

Former President Donald Trump is advocating for his "no tax on tips" policy, so imagine starting the day with a $500 tip from him. It is a promising start and a strong message.

In an unexpected stop, Trump visited a restaurant in Philadelphia before attending a campaign rally in the state. This visit comes amidst a heated debate over this issue between Trump and his opponent, Kamala Harris. 

Trump has accused Harris of stealing his ideas after she also promised to ease burdens on service workers by eliminating taxes on tips as part of a broader plan to support the working class and raise the minimum wage.

Tipping amounts to nearly $50 billion annually in a country where hospitality workers rely heavily on tips to supplement their income. Although these tips constitute a significant portion of these workers' earnings, they are also subject to taxation. 

The US Internal Revenue Service (IRS) considers tips part of income, requiring them to be taxed like any other income source. 

However, the IRS struggles to ensure accurate reporting by workers and employers. Reports indicated that $40 billion was declared as tips in 2023, but estimates suggest the actual figure is much higher.

Eliminating taxes on tips might seem like a dream for many workers, but it could have substantial economic repercussions. 

Some experts estimate that this measure could cost the US Treasury approximately $107 billion in lost taxes over ten years. With significant debate over the tax code renewal expected in 2025, this proposal could lead to sharp political divisions.

These suggestions pave the way for a new economic phase in the United States. Experts believe it would encourage workers to demand more tips and motivate employers to shift more wage responsibility to customers. As the expiration of the current tax law approaches, Congress has the chance to enact new policies. 

However, this comes with significant challenges, such as preventing high-income groups from exploiting this policy and avoiding gaps in Social Security and Medicare funding, primarily financed by taxes.