Tax cuts and credits have emerged as a focal point in the current political campaign, with former President Donald Trump proposing to eliminate the cap on federal deductions for state and local taxes—a change that could potentially cost over $1 trillion over the next decade. Both Trump and Vice President Kamala Harris have also endorsed a controversial idea: eliminating taxes on tips for service and hospitality workers.

This proposal, initially introduced by Trump in June and later adopted by Harris, aims to provide financial relief to workers who rely heavily on tips for their income. Bartenders and servers, like Prince Chikata and Jordan Kolesani, expressed enthusiasm for the idea, noting that tips constitute a significant portion of their earnings. However, while the proposal has garnered bipartisan support in Congress, experts caution that it may not effectively target those who need it most.

Economist Ernie Tedeschi highlighted that tipped workers represent only 2.5% of all employment in the U.S., and many low-wage workers already benefit from minimal tax burdens or tax credits. Critics argue that the proposal could inadvertently shift compensation responsibilities from employers to customers, allowing businesses to pay lower wages while relying on tips to supplement income.

Moreover, the potential for abuse exists, as some workers might reclassify their income to take advantage of the tax-free status of tips. The Harris campaign has suggested implementing income limits and strict regulations to mitigate this risk, but the effectiveness of such measures remains uncertain.

The proposal's popularity is particularly pronounced in Nevada, a key swing state with a large hospitality sector, where the elimination of tip taxes could resonate strongly with voters. As the campaign progresses, the implications of this tax policy will continue to be a topic of debate, raising questions about fairness and the economic rationale behind such measures.