In Nevada, where hospitality rules, tipping is not the issue

In Nevada, where hospitality rules, tipping is not the issue

By Howard Schneider and Ann Saphir

LAS VEGAS/RENO, Nevada (Reuters) – Two decades into her work as a unionized bartender in Reno, Nevada, Kristie Strejc has the comfort of job stability, her pick of the best shifts, and, unlike many in the hospitality industry, enough income that she’d actually benefit from plans floated by both U.S. presidential candidates to exempt tips from federal income tax.

But that isn’t influencing a vote she said is solidly for Vice President Kamala Harris, the Democratic candidate who has the endorsement of Nevada’s powerful Culinary Workers Union Local 226 and in recent polls is leading former President Donald Trump, the Republican challenger, in this battleground state.

“I’m kind of at a point where I could either go on ‘this’ vacation or buy ‘this’ for the house … I could probably do a little more of both if I had that money in my pocket,” she said when asked in an interview last month about the prospect of a tipped-income exemption. “That’d be a bonus, but I’m not going to vote because of one thing.”

Proposals to exempt tipped income from federal taxes have emerged as Harris and Trump use competing economic proposals in areas like tariffs and taxes to vie for the votes of different constituencies, a strategy Trump has since extended to include a tax exemption for overtime pay.

Some of the ideas are expensive. The Committee for a Responsible Federal Budget, a non-partisan public policy organization, recently estimated that eliminating taxes on overtime would cut government revenue by $1.7 trillion from 2026 to 2035.

At least in Nevada, however, where the tip-heavy hospitality industry still comprises more than a fifth of jobs, the proposal to exempt tips from taxes has landed with a bit of a shrug.

David Schmidt, chief economist for the Nevada Department of Employment, Training, and Rehabilitation, said the state had about $95 billion in annual wages reported to a Bureau of Labor Statistics quarterly census of wages in 2023. He estimates no more than about 1.5% was from tips.

“It is not nothing, but it is not close to the lion’s share,” he said. “I don’t think you’d see really huge impacts … It is a pretty person-to-person kind of thing.”

WORKING-CLASS ISSUE

Jeremy Gelman, an associate professor of political science at the University of Nevada, Reno, said he construed Trump’s proposal as an attempt to “sow doubt” among the roughly 60,000 members of the Culinary Workers Union Local 226 and Bartenders Union Local 165, whose well-organized voter mobilization program is “really effective when it’s turned on,” as it has been for Harris.

The fact that both candidates have made the offer blunts the advantage for either of them, particularly when “the economy is going okay … It is not the best, but is not in a recession,” he said.

Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union, said there was little credence given to Trump’s proposal on an issue the union official regards as more complicated than a no-tax-on-tips approach alone can reflect. He sees it tied into broader national issues like the below-minimum wages tipped workers are paid in many states, and how best to help lower-income families that may pay no taxes but need help meeting basic expenses.

“We’ve been fighting about fair taxation on tips for 30 years,” Pappageorge said in an interview last month, noting tips are not the same as a promised wage for an hour of work, but a gift at a customer’s discretion that can cause hourly earnings to vary widely.

While Nevada is one of seven states that don’t allow employers to pay less than the minimum wage to tipped workers, he said the union still regards the issue as part of a larger set of questions that figured into its endorsement of Harris.

“It’s a working-class voter issue,” Pappageorge said. “You could see a package that raised the minimum wage and perhaps didn’t eliminate tax on tips but reduced it or something.”

LIMITED IMPACT

The Internal Revenue Service has not published detailed estimates of tipped income since 2018, when 6.1 million workers reported $38.3 billion of tipped income for purposes of Social Security payroll taxes.

Recent research from the Budget Lab at Yale, a non-partisan policy research center, estimated as few as 3% of taxpayers nationally would benefit from a tipped-earnings exemption, with many others who collect tips making too little to owe any federal taxes.

The exact impact, however, would depend on the details of the changes to the tax code and on how workers and employers respond.

Harris has suggested the exemption should have an income limit, a detail that would lessen the effect on the federal deficit but further curb the number of workers who benefit. For whatever tax change was approved, economists would look for evidence of how behavior changed, and whether, for example, guaranteed pay gets reduced by employers if their workers got a “raise” through the tax exemption.

“Both camps see their proposals as a way to improve the economic standing of low-wage workers,” Brookings Institution researchers Ian Berlin and William Gale said in a recent analysis. “We agree that this is an important goal, but there are much better ways to achieve it,” including minimum wage changes or expanded child care or earned income tax credits.

“Exempting tips from taxation does nothing to help most low-income workers, and it may do little for many tipped workers,” they wrote.

‘A LITTLE BIT MORE’

Mike Bosma, a Reno-based certified public accountant and Trump supporter, said the tipped earnings exemption represented “pandering for votes” by both candidates when he believes the focus should be on how inflation surged and led to high interest rates that have pressured small business owners in particular.

“It has hurt a lot of people,” he said, adding that he holds Harris and President Joe Biden accountable for not doing more in the moment to try to curb price increases.

In Las Vegas, Rocelia Mendoza gathered with colleagues at the Culinary Union Hall one afternoon last month to prepare for a day of door knocking, despite the stifling heat, to encourage other union members to vote for Harris.

An assistant server at a casino restaurant, she said taxes took “too much” from the just-over $16 an hour she earns, and she’d love to “make a little bit more money for my family.”

But she didn’t trust Trump to deliver.

“My sister, my granddaughter, my husband, all my family is supporting Kamala Harris,” Mendoza said.

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