Trump's proposal to eliminate tip taxes raises budgetary concerns

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Trump's proposal to eliminate tip taxes raises budgetary concerns

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Daniel Bunn President and CEO at Tax Foundation | Twitter Website

Just over a week into his second term, President Donald Trump is swiftly implementing executive orders and policy reversals that could lead to significant changes. Among these proposals is the idea of eliminating taxes on tip income, a promise made during his campaign.

To move forward with this policy, Republicans will need to clarify what Trump's pledge entails. They must ensure the proposal does not become financially burdensome. Key considerations include whether "no tax on tips" applies solely to income taxes or extends to payroll taxes as well. Additionally, it must be determined if all tip income will be untaxed or only those from specific industries like food services or hospitality.

The financial implications are substantial. The Tax Foundation projects that exempting tips from income tax could reduce revenue by $118 billion over ten years. If both income and payroll taxes are exempted, the cost could approach $200 billion.

This article previews an op-ed originally published in City Journal.

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