Tax cuts and credits have emerged as a central theme in the current political campaign, with former President Donald Trump proposing to eliminate the cap on federal deductions for state and local taxes. This change, which he initially implemented during his presidency, could potentially cost over $1 trillion over the next decade. Both Trump and Vice President Kamala Harris have also suggested eliminating taxes on tips, a proposal that has garnered bipartisan support.

The idea of no taxes on tips was first introduced by Trump in June, with Harris adopting it in August as part of her broader agenda to support working families. Bartenders and servers, who often rely heavily on tips for their income, have expressed enthusiasm for the proposal, viewing it as a significant financial relief. However, experts caution that the benefits may not be as widespread as anticipated. Tipped workers represent only 2.5% of all employment in the U.S., and many low-wage workers already face minimal tax burdens.

Economists warn that while the proposal may help some workers, it could shift the compensation burden from employers to customers, potentially leading to lower wages for tipped positions. Additionally, there are concerns about the potential for abuse of the system, where other forms of income could be reclassified as tips to take advantage of the tax exemption.

Despite these complexities, the proposal remains popular, particularly in states like Nevada, where the hospitality industry is a significant part of the economy. The political appeal of tax cuts for workers resonates strongly, even as the implications of such policies continue to be debated among economists and policymakers.