Nevada – ‘No tax on tips’

Nevada, the land of flashing lights and endless entertainment, is effectively a city-state, and that city is Las Vegas. With a population of 3.1 million, a staggering 2.9 million call the Las Vegas metropolitan area home. The city thrives on hospitality, encompassing everything from food and drink to gaming and world-renowned shows. This industry is booming, with the addition of major sporting events like the upcoming Formula One race and a surge in professional sports teams, including the Oakland A’s baseball team and the NFL’s Raiders.

Las Vegas attracts over 36 million visitors annually, fueling a massive service industry that relies heavily on tips. This makes the “no tax on tips” policy, championed by both Donald Trump and Kamala Harris, a particularly potent election gambit in this swing state.

The Allure of a Tax Break

Trump, a local hotelier with a Trump Tower overlooking the Strip, first proposed the plan over the summer. Its appeal is undeniable, especially for service workers who rely on tips for a significant portion of their income. Kamala Harris, recognizing its potential sway, quickly adopted a similar stance, promising to abolish income tax on tips. This move prevented the plan from becoming a decisive advantage for Trump.

At the Bagle Cafe, a popular New York Deli and Mediterranean patisserie in the Las Vegas suburbs, waitresses like Ariana and Karla are enthusiastic about the proposal. Ariana explains, “I agree there should be no taxes on tips. Because half the time when you get taxed on tips, it’s a little bit more than what you expect. Most of my tips go to my gas, or I’ll give them to my parents so they can use it for the bills or if they need anything for groceries. For me, I think it’s a very big, very big part of my pay.”

Karla echoes this sentiment, stating, “I think that’s an amazing idea. It would help out a lot to not pay so much taxes on our daily tips. We work for tips, and tips will be the biggest part of your income. I’m a server – work four days a week, and I make a living from my tips.”

A Business Perspective

However, the owners of the Bagle Cafe, Hugo Requelme and Pablo Lemus, are more cautious. While they understand the benefits for their employees, they question the practical implementation of the plan.

“In theory, it sounds like a good idea: in practice, who knows how that would work, especially in a city like Las Vegas, where there’s so many restaurants everywhere,” says Hugo. “It’s driven by tips. So, I don’t know how that would really work – getting everything to have all these people that are currently paying taxes on tips not to pay taxes on them. I don’t know how that would work for me – it’s a big hurdle.”

Pablo adds, “Like Hugo said, it’d be more benefit to the employees themselves, because there’s no benefit that we get as a business, other than incentivising the employees, in that sense, to have a higher cheque at the end of the payroll – you know, the incentive, the motivation, that’s absolutely more money in their pocket at the end of the day.”

The Fiscal Elephant in the Room

The “no tax on tips” proposal, while appealing, comes with a hefty price tag. Estimates suggest it could cost between $100 billion and $250 billion in lost revenue over the next decade. Critics argue that this would exacerbate the already massive US budget deficit and federal debt. The Harvard University Budget Lab reports that only a small percentage of workers actually earn tips, making the policy a targeted benefit that could leave other low-wage workers disadvantaged.

Richard LaVerne, a seasoned Las Vegas hospitality veteran celebrating his birthday at the Lindo Michoacan Mexican restaurant, believes the plan is more of a political ploy than a genuine solution. “I think it’s more of a stunt than anything else. I think the reality is, they both suggested it because they know that if she gets elected, the Republicans (in Congress) will never pass it because they don’t want to give her the victory. And vice versa, if she gets elected, the Democrats will never pass it. So, it looks good in theory, but it’s just politicians trying to buy votes, because they’ll never pass.”

The Bottom Line

The “no tax on tips” debate reflects a larger conversation about wages, the gig economy, and the role of government in addressing income inequality. While the policy may resonate with service workers in Las Vegas, its long-term implications for the US economy and budget remain a subject of debate.

What are your thoughts on the “no tax on tips” proposal? Share your opinions in the comments below and join the discussion.