No tax on tips is a bad, unfair and costly idea

The BDN editorial staff operates independently of the newsroom and does not set policy or contribute to reporting or editing of articles elsewhere in the newspaper or on bangordailynews.com.

At a June rally in Las Vegas, a city where many people receive tips, Donald Trump said he would eliminate the tip tax if he were re-elected president. Democrat Kamala Harris recently jumped on that bandwagon, supporting the call for no tip tax at her own event in Nevada, a swing state.

Although this idea is popular, it is a bad idea on both sides.

First, as many economists have pointed out, tips should not be taxed differently than wage income. This would give employers a perverse incentive to pay their employees even lower wages in the expectation that they would earn more from tips that are no longer subject to income tax. Moreover, employers would have an incentive to classify all types of employees as tip earners, thereby paying them lower wages and passing on their payments to customers.