Dem
47
GOP
53
Rep. Alexandria Ocasio-Cortez (D-NY) is the only member of Congress who ever lived on tips. Hence she is a big fan of one provision in the House bill (which she otherwise hates), namely the section removing taxes on tips workers receive. However, the Senate version changed that part radically. Most importantly, it put a maximum of $25,000 on the amount of income that could be excluded. That was done, in part, to prevent highly paid partners in law firms, etc., from taking $1 in salary and, if they did a good job, getting millions in tips from their partners.
AOC said: "So, if you're at home, and you're living off tips, you do the math. Is that worth it to you—losing all your health care, not able to feed your babies, not being able to put a diaper on their bottom? In exchange for what?"
What she didn't mention is that there is a catch. That provision expires at the end of 2028, just before Donald Trump leaves office. It also applies only to tips that the employee reports to the employer for purposes of withholding payroll taxes. It also applies only to workers whose income is below a certain threshold. For workers who earn so little that they are not subject to federal income tax in the first place, there is no benefit.
There are other limits, as well. Only workers in specific industries are covered. Also, the provision affects only federal taxes, not state taxes. Finally, will tippers now give less because they think the tips are tax free? Consequently, the provision is not quite the windfall some tipped workers were hoping for. Still, for some workers, it is better than nothing.
Another thing the law may do is encourage workers who were previously not tipped to ask for tips. Think plumbers, auto mechanics, accountants, etc. Americans hate tipping and think the practice is totally out of control. Now it is only going to get worse. (V)