The no tax on tips provision of Donald Trump’s budget cannot be the pro-labor gift that the president has made it out to be while the rest of the bill slashes health care and other social programs for lower-income people. Representative Alexandria Ocasio-Cortez shed some light as to why that’s the case.
I have to imagine that many people living off tips aren’t making a whole lot of money, and consequently aren’t currently paying much fed income tax anyway. How much money are they really going to save from this?
I’m still unclear how this will be implemented, but even if the full tax bill of a single person (highest tax bracket group) making $25,000 was negated, it would only save them $1,298.
On one hand, that feels like a tiny sum. On the other, that is 5% of their annual income (and i know a 5% raise on my end would make a substantial difference in my own life).
Used this calculator to run the numbers
I played around with incomes in the $25K-$50K range and came up with similar numbers to yours. Basically, someone in that range who makes most of their income from tips stands to save anywhere from $1K-$3K, which could be significant. As AOC pointed out though, that could quickly turn into a net loss if you lose Medicaid benefits.