“You have to wonder if they’re proposing that because that makes them, both politicians on both sides, more appealing to young people in this industry,” Emily, 33, said in between pouring drinks at Our Bar on both Vice President Democratic nominee Kamala Harris and her challenger former Republican President Donald Trump now backing a “no taxes on tips” policy.
“I’m like of course you’re both jumping on this because everything else is so polarizing. It’s just like deleting student debt, all those things you throw out so people will actually go out and vote,” Emily said, while working a shift at the cozy bar within the Riverwalk District, with pool tables and darts.
Emily, like many Nevadans, relies on tips to make her living. In fact, the Silver State has the highest concentration of tipped workers in the nation, with all cash and non-cash tips currently subject to federal taxes.
Both Harris and Trump proposed the “no tax on tips” policy in rallies during recent campaign visits to Nevada.
“Obviously I’d be down for it because in the immediate it benefits me. But at the end of the day, it kind of takes away from the purpose of taxes in general,” she said. “Both sides are like I’ll do that too because it’s a good way to get the young vote”.
Emily said maybe a better approach would be to make credit card tips less taxable. “The way they’re taxed it’s like half my paycheck is taken away,” she said. “I think I’d rather them restructure it [credit card tips] than completely take it [taxes] away. That makes more sense.”
Some employers take credit card processing fees from servers’ tips, which is currently only illegal in three states, California, Maine, and Massachusetts.
Vanessa cleans up the bar counter at The Ole Bridge Pub, after a night of trivia.
Vanessa, a Reno bartender originally from California, splits her time working between The Ole Bridge Pub on N. Sierra Street, and the Peppermill Casino.
“I appreciate that there’d be no tax on tips… as a service industry job you’re kind of at the bottom of making money so you rely on your tips heavily,” she said.
Discussions among bartenders over how tips are managed is constant. Vanessa shared she’s heard talk of how more regulated tip-reporting procedures could benefit bigger companies like the casino industry while squeezing smaller businesses like her other employer, the Ole Bridge Pub. Casinos already have better tip-reporting infrastructure such as extensive video cameras and card readers, which could be costly for local bars which operate off what Vanessa called “the honor system.”
Ultimately, Vanessa seemed more in favor of not taxing tips. “I feel like it would encourage more people to go into tip-based work [if passed]. When I moved here from California, I didn’t realize most jobs were tip-based jobs,” she said. “You could make more money than hourly than you could in California [if passed].”
Outside of the industry, people aren’t so sure of the policy. “With a lot of these policies, I feel they say they’re going to benefit the working and middle-class, and they end up benefiting people who have a larger income,” said Katrina Kozack, 26, a second-year UNR medical student, who has thought through many of the issues during the current election cycle.
Some economists and business media would agree with Kozack. Experts warn the policy may help employers more than their staff, who in most cases wouldn’t actually see their tax bill reduced.
Many economists say it would favor the high earners in service industries and make lower income service workers even more reliant on tipping, while discouraging employers from paying fair wages.
Since some of these concerns have been raised, a new bill has been introduced that would address some of them.
Nevada’s District 4 Democratic Congressman Steven Horsford recently introduced “The Tipped Income Protection and Support Act”, or TIPS Act, which would not only remove the federal income tax on tipped workers but also do away with the federal subminimum wage, which currently sits at just $2.13 an hour.
The measure would apply only to workers who earn less than $112,500 in tips. Eligible workers would need to be employed in occupations typically earning tips such as cosmetology; hospitality; food and beverage service; parking attendants; and custodial service.
Nevada is already one of the states that has eliminated the subminimum wage for tipped-based employees, so Horsford’s proposal isn’t as impactful in Nevada.
But in some states the federally allowed minimum wage for tipped workers is as low as $2.13 an hour, much less than the federal minimum wage for all other workers which is at $7.25.
Ultimately, this policy sounds good on the surface and resonates with service workers like Emily and Vanessa, who rely on the whims of tips to get by. In terms of practicality though, it seems neither candidate has truly thought through the complexities of what such a policy would exactly entail.
It does make for a quality soundbite and interesting chatter at a local neighborhood bar, so don’t expect to stop hearing it as the election gets nearer.