Efforts to eliminate taxes on tips have sparked a heated debate over the enduring issue of the sub-minimum wage for tipped workers. Under current federal law, tipped workers can receive as little as $2.13 per hour, a rate unchanged since 1991. In contrast, only seven states, including Alaska, California, and Washington, have abolished this sub-minimum wage standard. The ongoing discussion has gained traction with the introduction of the Tipped Income Protection and Support Act by Democratic Congressman Steven Horsford of Nevada.
Horsford's proposed legislation, reintroduced on February 13, aims to abolish the sub-minimum wage for tipped workers, ensuring they earn a fair hourly rate. The bill also seeks to eliminate federal income taxes on tips. Nearly 6 million workers across the United States rely on tips for the majority of their income. Despite this, the restaurant industry, including the National Restaurant Association, opposes Horsford's bill while supporting the abolition of taxes on tipped income.
In Nevada, where tipped workers are a significant part of the workforce, Horsford's bill has gained support from fellow Democratic congressional representatives Dina Titus and Susie Lee. The Culinary Union, representing 60,000 food and hospitality workers in Nevada, also endorses the legislation. Sherie Cummings, a cocktail server at Mandalay Bay Casino and a member of the Culinary Union, highlights the struggle faced by many in her profession.
“Just today, I got my paycheck for two weeks and it was only $94 so all of it basically went to my allocation, which are the taxes, so no tax on tips would be great,” – Sherie Cummings
Diana Bond, another hospitality worker, shares similar concerns about the current system.
“We need to make sure that all hospitality workers are being treated fairly and getting an hourly rate that they can survive on. There are so many states that are less than $5 an hour, and I don’t know how it’s not illegal at this point. They’re crushing us, and they’re crushing our ability to survive and support and provide for our families.” – Diana Bond
“My paycheck should be around $1,500 biweekly. And I get less than $200 biweekly out of my paycheck,” – Diana Bond
“Our tips are our wage, and to be heavily taxed like that is unfair, and it’s not right.” – Diana Bond
The push for reform has seen various developments over recent years. During Trump's administration, a compromise was reached in 2018 before his Department of Labor re-enacted the rule in December 2020. However, the Biden administration retracted it early in 2021 before it could take effect. Meanwhile, former President Donald Trump has reiterated his commitment to abolishing taxes on tips during a Las Vegas rally.
Democrats have consistently supported efforts to abolish taxes on tipped income. Nevada Democratic senators Catherine Cortez Masto and Jacky Rosen have reintroduced a bipartisan bill supporting this cause. Ted Pappageorge from the Culinary Union emphasizes the importance of Horsford's legislation.
“It’s outrageous that many companies across the country still pay tipped workers as little as $2.13 an hour. The legislation that Congressman Horsford is championing will uplift millions of workers, including many in Nevada, by eliminating federal income taxes on tips and ending the sub-minimum wage.” – Ted Pappageorge
“Eliminating taxes on tips and ending the $2.13 sub-minimum wage, along with going after big corporations’ price gouging on food, gas, and housing must be part of an overall program to tackle the high cost of living for working families,” – Ted Pappageorge