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No tax on tips: An answer in search of a question
In recent weeks, both Vice President Kamala Harris and former President Donald Trump have announced proposals to exempt tips from federal taxes, much to the chagrin of economists across the ideological spectrum.
The obvious problem is that the proposals are inconsistent with sound tax policy. The less obvious problem is that exempting tips would not even help the vast majority of low-income workers. Still, the proposal opens the door for discussing better ways to organize taxes and help low-income workers, such as expanding the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).
The obvious problem is that the proposals are inconsistent with sound tax policy. The less obvious problem is that exempting tips would not even help the vast majority of low-income workers. Still, the proposal opens the door for discussing better ways to organize taxes and help low-income workers, such as expanding the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).
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