Nevada: A Swing State Free from Tax on Tips
Nevada essentially operates as a city-state, with Las Vegas as its pulsating heart.
Out of approximately 3.1 million residents scattered across this arid land, a staggering 2.9 million call the Las Vegas metro area home.
The cornerstone of the local economy revolves around hospitality, encompassing food, beverages, gaming, transportation, and the lively spectacles that have put this city on the map.
Moreover, the thrilling world of sports is increasingly becoming an integral part of the scene—just a stone’s throw away from where I’m drafting this, construction crews are erecting grandstands for the upcoming Formula One race set for late November.
Last year, this vibrant city-state welcomed over 36 million visitors, all eager to indulge in gastronomy, libations, and jubilant moments.
This influx created a high demand for service workers, whose compensation often sweetens with generous tips.
Given that Nevada is also a pivotal swing state in this election cycle, what better way to sway the vote—along with its six crucial electoral votes—than by strategically courting the service industry workforce dominating the local voter landscape?
Donald Trump made waves last week at a Turning Point Action rally held at the Thomas & Mack Center in Las Vegas.
His rallying cry? “No tax on tips!”
This snappy slogan resonated with many, especially in Las Vegas, where it may just tip the electoral scale in Trump’s favor. He introduced this concept over the summer, and it gained remarkable traction.
In fact, Kamala Harris felt compelled to come forward with her own assurance to eliminate the income tax on tips shortly thereafter. Failure to do so might have jeopardized her standing among voters.
Trump has strong ties to Las Vegas; his towering Trump Hotel, resplendent with golden glass, dominates the skyline of the Strip. This connection bolsters his credibility in a state that Joe Biden secured by a mere 33,000 votes in the previous election. Interestingly, Trump has improved his electoral performance since 2016, when Hillary Clinton won the state.
However, one must ponder whether it is practical to grant tax relief to one subset of workers while leaving others behind.
To explore this question, we ventured into the suburbs and found ourselves at Bagel Cafe, a tantalizing mix of a New York deli and Mediterranean bakery—think large portions served round-the-clock, thanks to their on-site bread baking.
Weekend diners often face a lengthy 45-minute wait for a table, but the food is well worth it.
The waitstaff here couldn’t be more enthusiastic about the idea of sidestepping taxes on tips.
Ariana, one of the servers, voiced her agreement: “Eliminating taxes on tips sounds great. It’s frustrating how tax often exceeds what we anticipate.” She revealed how much of her earnings go towards gas or helping her parents with household expenses. “For me, tips are a significant part of my income.”
Her coworker Karla chimed in, “That’s an incredible proposal! It would definitely alleviate the tax burden on our daily tips. Tips form the bulk of our earnings. I work four days a week as a server, and I depend on them to make a living.”
Both candidates endorse the same proposal—does that sway Karla’s voting preference? “Not really, to be honest. It’s a solid idea, but it doesn’t sway my opinion,” she admitted.
In downtown Las Vegas, an artist’s mural celebrates Kamala Harris with the slogan “WE VOTE WE WIN,” capturing the spirit of political engagement.
However, co-owners Hugo Requelme and Pablo Lemus, who started their journey as servers two decades ago, expressed skepticism about the plan. “Theoretically, it sounds good,” Hugo stated, “but in practice? Who knows, especially in a city like Las Vegas brimming with restaurants.” He elaborated on the complexities of changing tax structures for a workforce predominantly reliant on tips. “It’s a big hurdle for all involved.”
I pressed them on whether the plan would alter their business practices. “Not really,” Hugo replied. “It would primarily benefit the servers. For our business, we wouldn’t adjust any prices based on that.” Pablo affirmed, “Like Hugo mentioned, the change would help employees, increasing their take-home pay, but it won’t impact our operations much.”
Critics of the tipping culture argue that businesses should compensate their employees with a higher minimum wage (currently set at $7 an hour), thus reducing their reliance on tips.
Yet, given the aftermath of recent inflation, Pablo acknowledged, “If wages rose significantly, it would undeniably affect our bottom line. Inflation makes it challenging for any business to raise prices without pushing customers away.” He added, “We have to balance wage increases with what diners can afford—there’s a threshold we can’t exceed.”
Interestingly, when Trump initially unveiled his no-tax plan, numerous customers began writing “no tax on tips” on their checks—a grassroots movement that inadvertently gained momentum. However, interest waned after Harris adopted a similar stance.
On the south side of Las Vegas, we stumbled upon Restaurante Lindo Michoacan, a cherished family establishment boasting five locations throughout the area.
The atmosphere buzzed with enthusiasm, as staff poured their hearts into serving patrons and spontaneously burst into joyous song for birthday celebrations, guitars and tambourines at the ready.
Bar staff member Leonarda expressed her support for the no-tax agenda: “Trump should absolutely be reelected! He’s going to eliminate taxes on tips for all workers. It’s simply unfair that we take home only a fraction of our earnings due to taxes.”
Think tanks have calculated that the tip tax exemption could cost between $100 billion to $250 billion over a decade.
I questioned Leonarda about why he wouldn’t consider voting for Harris, given her similar proposal. “I’m not sure. I’ve always viewed Trump as a relatable figure, someone who fights for us,” he explained.
Meanwhile, his coworker Maybelline exhibited indecision: “There are pros and cons to both sides. Trump advocates for tax relief on tips, but Kamala offers healthcare proposals. It’s challenging to decide which direction to lean.”
A trend has emerged: young Latino males leaning towards Trump, angering Harris’s campaign, which faces declining support from the Latino community, especially men.
This tension likely explains why Democrats have been quick to denounce off-color jokes made by a comedian at Trump’s Madison Square Garden rally regarding Puerto Ricans.
However, when examining the financial ramifications of the no-tax-on-tips proposal, some experts raise flags. Estimates suggest it could cost hundreds of billions in lost revenue over the decade, benefitting only an estimated 2.5% of low-wage workers relying on tips while leaving the majority of low-paid workers in a lurch.
The Harvard University Budget Lab indicates that in 2023, about 4 million workers were in tipped professions, representing around 2.5% of all jobs. Surprisingly, this percentage does not significantly rise among lower wage positions. For those earning below $25 an hour, merely 4% fell into tipped roles.
On the campaign trail, both candidates have ramped up their spending promises—Trump spending at nearly double Harris’s rate, as reported by “The Economist.” This spending spree occurs amidst an impending fiscal cliff, with Trump’s tax cuts expiring, launching what could become a significant battle in Congress over tax policy.
Meanwhile, sky-high budget deficits and national debt loom large, adding pressure to the conversation. The Tax Foundation estimates that exempting tips from federal taxes might incur a staggering $100 billion cost over ten years. The Committee for a Responsible Federal Budget estimates potential costs between $150 billion to $250 billion, exacerbating the challenge of offsetting tax cut extensions and potentially deepening an already alarming debt trajectory.
Additionally, the Bipartisan Policy Center deliberates the unintended complications of not treating tips as taxable income. Would job seekers leap into tipped roles purely for tax benefits? What if non-tipped jobs began introducing tipping options to capitalize on the “no tax on tips” idea?
Back at Restaurante Lindo Michoacan, amid lively birthday celebrations, one customer shared a more pragmatic view of the no-tax plan. Richard LaVerne, an industry veteran, opined, “Ultimately, it feels more like a publicity stunt. Both parties know that if Trump loses, the Republicans won’t pass it to give her a win. Conversely, if she loses, the Democrats will resist it. Politicians appear to be trying to garner votes without real intention of following through.”
While it wouldn’t be the first time political promises fell flat, in a city built on risk, Trump and Harris are rolling the dice, hoping their bets pay off in this critical swing state.
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Edited by: Ali Musa
alimusa@axadletimes.com
Axadle international–Monitoring