Aside from Donald Trump’s “very smart” riff about sharks and electric boats, the biggest takeaway from his rally in Las Vegas last weekend was the promise he made to stop the IRS from getting its hands on the money workers earn from tips.
To be fair, the former president’s general inclination to lower tax rates is among the few positions he holds that is actually in line with traditional conservative orthodoxy — even if his support for such policies is largely opportunistic rather than principled. Regardless of whether or not he would (or could) implement such a change if elected, his proposal represents one of the few opportunities we’ve had so far this election cycle to discuss actual policy concepts rather than political theatricality.
Certainly, reducing the tax burden — the rate as well as compliance costs — on tipped earnings would be a welcomed reform among the millions of Americans who depend on tips as part of their regular income. And given the large service industry in Las Vegas, its impact would not go unnoticed locally.
For starters, it would help put a lot of money back into the pockets of a lot of ordinary Americans. According to Reason.com, tipping accounts for roughly $38 billion worth of income — which is a large chunk of money that families struggling to make rent and cope with inflation would be happy to keep tax free. It’s also a dollar amount that would likely increase as workers and employers adjust their behavior to take advantage of such a massive potential tax break.
While Democrats and the Culinary Union have questioned Trump’s sincerity, it would still be hard for many in Congress to reject the idea outright. Lowering the tax burden on workers, especially service workers, is generally accepted among policymakers in both parties as a “pro-growth” fiscal policy. Indeed, that’s why even Democrats are looking to retain portions of Trump’s 2017 rate cuts that apply to workers who make less than $400,000 per year.
However, eliminating taxes on tip income is really only half a policy proposal. What’s missing is the other half of the equation, and it’s the same thing that was missing when Trump signed that 2017 law into effect reducing tax rates across the board: a reduction in federal spending.
After all, deficits matter. And cutting at least $38 billion in revenue with no plan for adjusting the other side of the ledger is only going to exacerbate the problem.
Thanks to spendthrift presidential administrations from both parties, America’s national debt has ballooned to incomprehensible levels. As the self-declared “King of Debt,” Trump’s presidential term was no exception. Even before the massive spending associated with the COVID pandemic, his administration was on track to reach record levels of red ink.
To be sure, a lack of fiscal discipline from Republicans is nothing new. Even the vaunted Ronald Reagan couldn’t bring himself to slow the growth of spending enough to stave off large deficits. However, there used to at least be a core of conservative Republicans ready to stand up for the idea that reducing spending is equally as important as reducing tax burdens.
Unfortunately, as David McIntosh from the Club for Growth points out, such traditionally conservative members of the Republican Party are increasingly rare as Trump’s populist “national conservatives” take over the right.
Gone are the days of someone such as Newt Gingrich working with a Democratic president to balance a budget and craft a possible solution to Social Security’s future woes. So too are leaders such as former Speaker of the House Paul Ryan who pushed relentlessly for reforms to entitlement spending. Even individuals such as Rand Paul — who has often challenged Republicans to take on the “sacred cow” of defense spending — find themselves increasingly as an outlier in Republican politics.
In the name of Trumpian populism, such fiscal restraint has, apparently, become an endangered trait among GOP congressional leaders.
None of this is to say that effective tax cuts shouldn’t be vigorously pursued — especially cuts aimed at working class constituencies such as tipped employees. However, such cuts simply aren’t going to mean much if congressional leaders aren’t also working toward a balanced budget and a less complex tax code for the rest of us.
Democrats and President Joe Biden claim they have the answer to our ever-expanding spending habits by “taxing the rich” and increasing corporate rates — demonstrating they are just as unserious as Trump’s GOP is about getting control over our runaway deficits. Proposed tax increases on wealthier families, for example, aren’t even projected to cover current budget gaps, let alone do so while funding new and expanding spending priorities.
In other words, neither party wants to take so much as a dull pocket knife to the overwhelming (and growing) list of federal expenditures that are driving us into a perpetually larger fiscal hole. And while that feels like an evergreen statement in American politics, the utter lack of principled conservatives stomping their feet in protest demonstrates just how unserious and lacking in policy nuance our politics have become.
Such a lack of principled policy discussions might bode well for candidates who are prone to riff about sharks and electric boats, but it doesn’t portend good things for the rest of us — regardless of who ends up in the White House next year.
Michael Schaus is a communications and branding expert based in Las Vegas, Nevada, and founder of Schaus Creative LLC — an agency dedicated to helping organizations, businesses and activists tell their story and motivate change. He has more than a decade of experience in public affairs commentary, having worked as a news director, columnist, political humorist, and most recently as the director of communications for a public policy think tank. Follow him at SchausCreative.com or on Twitter at @schausmichael.
