Former President Donald Trump has inspired his supporters to take a unique approach to promoting his 2024 election campaign: leaving notes on receipts.
Some of these supporters have begun writing “Vote Trump to keep all of your tip” and similar messages when they leave a tip for service workers, inspired by one of Trump’s latest campaign promises: exempting tips from taxes.
“When I get to office, we are going to not charge taxes on tips,” Trump said at a Las Vegas rally on June 9. “And we’re going to do that right away, first thing in office.”
The suggestion drew mixed reactions, including some from within the Republican party. Some members applauded the idea, while many fiscal conservatives questioned its practicality.
Other people also questioned whether it would even be possible for Trump to exempt tips from taxes if he’s reelected as president. A waiter on Threads claimed “he doesn’t have the power to do that.”
THE QUESTION
Can the president exempt tips from taxes?
THE SOURCES
THE ANSWER
The president doesn’t have the power to exempt tips from taxes on his own. However, he can encourage Congress to pass a law for him to sign.
WHAT WE FOUND
Trump has not said how he intends to execute his proposal to exempt tips from taxes if he’s reelected as president, but he wouldn’t have the power to do so on his own. Such a significant change would require cooperation from Congress.
Federal law classifies tips as wages, which are taxable income. Employees are required to report their tips and pay income taxes on them. Employers also have to pay payroll taxes on their employees’ tips.
The president has some executive powers to change how laws are interpreted or enforced, but only when there’s wiggle room provided in the relevant law. Laws regarding taxation on tips are explicit and have been set in stone for years, meaning any attempts to exempt tips by executive order alone would almost certainly be blocked by the courts.
There are only two ways to change federal law. One is for the courts to strike down the law as unconstitutional, which in this case would require a challenge to a law that’s been on the books for decades. The other is for Congress to pass a new law.
Some of Trump’s Republican allies in Congress have already proposed legislation to exempt tips from taxes.
Sen. Ted Cruz (R-Texas) introduced a bill – along with Sen. Steve Daines (R-Mont.), Sen. Kevin Cramer (R-N.D.) and Sen. Rick Scott (R-Fla.) – that would allow workers to deduct any tips they earn from federal income tax.
Rep. Matt Gaetz (R-Fla.) introduced a bill – along with Rep. Thomas Massie (R-Ky.) and Rep. Marjorie Taylor Green (R-Ga.) – that would essentially remove tips from the federal tax code completely, meaning they wouldn’t even have to be reported to the IRS.
“As the cost of living continues to rise, the hardworking men and women in the service industry… must be allowed to keep every dollar of tip money they earn,” Gaetz said in a statement.
Both bills are brand new and have yet to be thoroughly debated. But one nonprofit group, the Committee for a Responsible Federal Budget, has already warned proposals like these could cost tens of billions of dollars a year, and encourage businesses of all kinds to change their fee structures in order to take advantage of the exemption.
“In practice, exempting tip income from taxation would lead workers and employers to reclassify ordinary income as tip income where possible and could lead to a larger shift toward lower base pay and higher tipped income, more broadly,” the analysis read.
Even if Congress passes a new law exempting tips from federal taxes, they could still be taxed on the state and local level, unless similar laws were passed in states that have income taxes.
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