It started as the sort of pie-in-the-sky promise that would find favor despite having zero chance of materializing, like a politician’s pledge to ensure two yearly visits from Santa if elected.
Yet talk of eliminating income taxes on tips hasn’t fizzled as expected in the runup to November’s elections. Indeed, it’s emerging as a true campaign issue, with implications for whichever side might win the White House, according to the restaurant industry’s chief lobbyist, National Restaurant Association EVP Sean Kennedy.
Appearing on this week’s episode of the Working Lunch political-affairs podcast, Kennedy acknowledged that the industry is still analyzing what a change in the way tips are taxed could mean for the restaurant business.
“It is definitely a surprise,” Kennedy told co-hosts Joe Kefauver and Franklin Coley, who run the government-affairs shop Align Public Strategies when not at the microphone. The session was recorded before presumptive Democratic Party presidential candidate Kamala Harris disclosed over the weekend that she, too, would seek to exempt servers’ gratuities from federal income taxes if elected.
Trump had made a similar pledge several weeks ago. Both issued the promise while addressing crowds of hospitality workers in Nevada.
The unlikely emergence of the tax exemption as a campaign issue is likely to give the matter relevance next year, when Congress addresses tax measures from the Trump administration that are set to expire. The timing will likely muster considerable interest in tax code changes from both political parties, and now the tips exemption will likely color those discussions and negotiations.
The NRA has endorsed a bill championed by Sen. Ted Cruz (D-Texas) to enact Trump’s pledge. But there’s no consensus among members on whether the change would be positive or negative.
“Honestly, it’s something that we’re still polling and researching with our membership,” said Kennedy.
Some of the operators have expressed dismay at the distraction from meatier issues, like immigration reform, he recounted. Yet others have contended that the bump in servers’ take-home pay “would solve his recruitment issues,” the lobbyist reported.
Most political pundits still dismiss the possibility of shielding servers’ tips from federal income taxes as unrealistic and politically unfeasible. They note that the move would decrease federal revenue dollars by hundreds of billions, and that shortfall would have to be offset by increasing the tax burden elsewhere.
There are also potential issues for restaurant servers and employers that have yet to be fully weighed, according to Kennedy.
For a review of the concerns, and what Kennedy expects from the Democratic Party’s annual convention next week, hit Play.
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