Horsford’s ‘no tax on tips’ plan would eliminate subminimum wages

Rep. Steven Horsford introduced his version of a no-tax-on-tips bill that includes getting rid of the federal tipped subminimum wage, which he said would make a bigger difference than the Republican-led bills currently on the table.

The Tipped Income Protection and Support (TIPS) Act would exempt tips from federal income tax up to a certain threshold while maintaining payroll taxes for Social Security and Medicare, and it would eliminate the federal tipped subminimum wage of $2.13 an hour.

“If we’re serious about income equality and closing the gender pay gap, then this is the bill people need to get behind,” the Nevada Democratic representative said at a press conference in Washington D.C. on Tuesday.

Six million tipped workers who are women and people of color make as little as $2.13 an hour currently, and Latinas and Black women in particular face significant income disparities, he said.

“No one should have to depend on the whims of a good tip, which is not a guarantee,” Horsford said.

Saru Jayaraman, president of One Fair Wage, an organization of 300,000 restaurant and service workers and 1,000 restaurant owners, said the subminimum wage for tipped workers is a direct legacy of slavery. It was created after emancipation to allow restaurants to hire newly freed slaves but not pay them much — while telling them to live off of tips, she said.

It was the first time in world history that tips were used as a replacement for wages rather than a bonus, Jayaraman said, adding that 43 states continue to use a sub­minimum wage. Nevada is one of the seven states without a subminimum wage option for tipped workers, who earn at least $12 per hour.

“‘No tax on tips’ has been a rally cry of this presidential election, but did you know that two-thirds of tipped workers don’t even earn enough to pay federal income tax?” Jayaraman said during the press conference. “So yes, it’s great. Let’s have a little bit of extra money around tax season, but what we really need is a raise.”

Former President Donald Trump announced his plan to end taxes on tips during a Las Vegas rally in June. Since then, lawmakers on both sides of the aisle signed on. Vice President Kamala Harris announced she supports ending taxes on tips, coupled with an increase in minimum wage, which Nevada experts said would make a bigger difference than just ending taxes on tips.

Republican members of Congress introduced bills in the House and Senate to amend the Internal Revenue Code to exclude tips from the federal income tax, with the Senate bill including payroll taxes and the House bill exempting them.

Horsford, who led Nevada’s Culinary Training Academy before he was elected to Congress, said those other bills don’t address the subminimum wage and don’t have guardrails, while his is “thoughtful and comprehensive.”

“We cannot delay this action any longer,” he said. “We must act to ensure every worker, regardless of their job, can earn a fair wage and keep more of what they earn. The future of our workforce depends on it, and closing the racial wealth gap and the gender gap will be part of why the TIPS Act will be so successful.”

Contact Jessica Hill at jehill@reviewjournal.com. Follow @jess_hillyeah on X.