The White House recently posted on X about President Trump's "One Big Beautiful Bill," which proposes the elimination of taxes on tips for American workers.
According to the Internal Revenue Service (IRS), tips received by service industry employees are considered taxable income. Workers must report any month in which they earn $20 or more in tips to their employer by the 10th day of the following month. These tips are then subject to income tax, Social Security, and Medicare.
The U.S. Bureau of Labor Statistics reports that as of May 2023, the median hourly wage for waitstaff, including tips, was $14.00. Many waitstaff in the United States rely heavily on tips to supplement their income. In some states, the base wage for tipped employees is as low as $2.13 per hour, with tips expected to make up the difference to reach minimum wage.
According to the Pew Research Center, 16% of Americans reported earning income through online gig platforms in a 2021 survey. Of those gig workers, 58% indicated that this income was essential or very important for covering everyday expenses. This highlights how tax policy changes can directly impact the financial stability of gig economy workers.
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