"Tip Taxes Are High"... Trump Criticized by Employees, $345 Trillion Tax Cut Plan Also Released [Song Seungseop's Financial Light]

Trump, Republican Presidential Candidate's Tip Tax Exemption Pledge
Started from Complaints of Nevada Restaurant Workers
40 Million People Paying $38 Billion Annual Tip Tax 'Enthusiastic'
Some Democrats Also Express "Support"

The photo is unrelated to the article content.

Interest in the U.S. presidential election is heating up. The Democratic Party has incumbent President Joe Biden as its candidate, while the Republican Party has former President Donald Trump. Both candidates have presented various pledges to win the people's votes. Recently, a pledge announced by former President Trump has gained significant support from Americans. It is the 'tip tax exemption' system. Why are Americans so enthusiastic about the tip tax exemption?

The tip tax exemption pledge was first introduced at a rally held on the 9th of last month at Sunset Park in Las Vegas local time. At that time, former President Trump announced a plan to reduce taxes for waiters. He said, "This is the first time I am saying this. Hotel employees and those who receive tips will be very happy. If I take office, I will not impose taxes on those who receive tips."

Former President Donald Trump, officially nominated as the Republican presidential candidate, is seen smiling brightly while attending the final day event of the Republican National Convention held in Milwaukee, Wisconsin, on the 18th (local time).
[Image source=Yonhap News]

Then, on the 18th, at the Republican National Convention held in Milwaukee, Wisconsin, he mentioned the tip tax exemption plan again. He introduced the tip tax exemption pledge as an idea that came from a conversation with an employee. At a restaurant in Nevada, an employee told former President Trump, "The government is always after me. It's always because of the tips." The employee complained that working as a staff member and receiving tips but being taxed on them reduced their income.

In fact, the U.S. tax system requires reporting tips in addition to the base wage received from the employer. Individuals must record their tip income themselves, and if monthly tip income exceeds $20, they are obligated to report it to their employer using IRS forms by the 10th of each month. Employers then use this information to report the combined wages of employees, including tips, to the IRS. Tax reporting regulations vary depending on the size of the business, the amount of tips received, and the job duties, making it complicated, but failure to comply properly can result in audits.

Tips are especially an important means of livelihood for employees. Since there is a salary, tips might be considered supplementary income, but in many cases, tips exceed the salary. It is easier to receive tips as a floor staff who takes orders or serves food, so some avoid working in the kitchen. Also, in many U.S. states, employers are not penalized even if the base wage is set below the legal minimum wage. This is because as long as the sum of tips and base wage exceeds the minimum wage, there is no problem. Tips effectively function as earned income.

According to estimates from the Budget Research Institute at Yale University, about 4 million Americans work by receiving tips. Based on 2018 data, the tip income tax paid by these workers amounted to approximately $38 billion. For tip workers, former President Trump's pledge is naturally very appealing.

A message states that an amount equivalent to 18% of the payment price was automatically applied as a tip and charged.

However, one question arises. Aren't tips given to employees in cash? If they don't report taxes, they can avoid paying, so how does the government collect taxes? Former President Trump had the same question and asked an employee who expressed dissatisfaction. The employee reportedly answered, "There is almost no cash among the tips." In the past, tips were given in cash or by card, but now most are paid by card. Nowadays in the U.S., employees even bring card terminals to the table to encourage tipping, and a screen appears allowing customers to select the desired tip amount.

Tips paid by card obviously cannot avoid taxes. This is why Americans cheered the tip tax exemption. Throughout former President Trump's speech, Republicans shouted, "No tax on tips." The Republican Party officially adopted the tip tax exemption pledge. Mike Johnson, a Republican member of the House from Louisiana, said, "We will pass it as soon as possible." Even Democratic Senators Jackie Rosen of Nevada and Catherine Cortez Masto expressed support, saying that eliminating tip income tax would financially help hardworking employees.

Related bills have already been submitted. According to major foreign media such as The New York Times, a bill has been introduced in the House to exempt tips from income and payroll taxes. According to the nonpartisan Congressional Budget Office, this measure would result in a revenue loss of up to $250 billion (approximately 347 trillion won) over ten years.

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