[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-seo-304560-105":3,"detail-sidebar-cat-1-en-105":80,"doc-detail-304560-en":126},{"code":4,"msg":5,"data":6},0,"ok",{"site_id":7,"language":8,"slug":9,"title":10,"keywords":11,"description":12,"schema_data":13,"social_meta":73,"head_meta":75,"extra_data":77,"updated_unix":79},105,"en","no-tax-on-tips-budgetary-distributional-and-tax-avoidance-considerations","No Tax on Tips - Budgetary, Distributional, and Tax Avoidance Considerations","","No Tax on Tips examines proposals to exempt tips from income tax and possibly payroll tax in the 2024 presidential debate. It summarizes key findings on who reports tips, how that relates to taxable income and tax liability, and the budgetary and distributional effects of alternative policy designs in 2026. The report also estimates costs over the next decade, discusses how eligibility limits by industry could reduce spending, and evaluates tax avoidance incentives created by favoring one income form over others.",{"@graph":14,"@context":72},[15,34,55],{"@type":16,"itemListElement":17},"BreadcrumbList",[18,23,27,31],{"item":19,"name":20,"@type":21,"position":22},"https://docshare.wps.com","Home","ListItem",1,{"item":24,"name":25,"@type":21,"position":26},"https://docshare.wps.com/template/","Template",2,{"item":28,"name":29,"@type":21,"position":30},"https://docshare.wps.com/template/general/","General",3,{"item":32,"name":10,"@type":21,"position":33},"https://docshare.wps.com/template/no-tax-on-tips-budgetary-distributional-and-tax-avoidance-considerations/304560/",4,{"url":32,"name":10,"@type":35,"image":36,"author":41,"headline":10,"publisher":44,"fileFormat":47,"inLanguage":8,"description":12,"dateModified":48,"datePublished":49,"encodingFormat":47,"isAccessibleForFree":50,"interactionStatistic":51},"DigitalDocument",{"url":37,"@type":38,"width":39,"height":40},"https://docshare.wps.com/thumbnails/no-tax-on-tips-budgetary-distributional-and-tax-avoidance-considerations/304560.png","ImageObject",442,249,{"name":42,"@type":43},"Mia  ","Person",{"url":19,"name":45,"@type":46},"DocShare","Organization","application/pdf","2026-09-21","2026-09-19",true,{"@type":52,"interactionType":53,"userInteractionCount":22},"InteractionCounter",{"@type":54},"ViewAction",{"@type":56,"mainEntity":57},"FAQPage",[58,64,68],{"name":59,"@type":60,"acceptedAnswer":61},"What policy design choices matter most for a tax exemption on tips?","Question",{"text":62,"@type":63},"The report emphasizes that effects depend on eligibility rules (such as limits by industry or income) and whether the exemption applies to payroll tax as well as individual income tax.","Answer",{"name":65,"@type":60,"acceptedAnswer":66},"How common are tip reporting and who tends to report tips to the IRS?",{"text":67,"@type":63},"About 4 percent of families report tips to the IRS, and those who do are disproportionately young, unmarried, and lower-income, meaning many already pay little or no income tax.",{"name":69,"@type":60,"acceptedAnswer":70},"Why could a tips tax break increase tax avoidance?",{"text":71,"@type":63},"The report explains that favoring one type of income over others can create opportunities for tax avoidance, with the real cost potentially exceeding static estimates depending on customer behavior.","https://schema.org",{"og:url":32,"og:type":74,"og:title":10,"og:site_name":45,"og:description":12},"article",{"robots":76,"canonical":32},"index,follow",{"doc_id":78,"site_id":7},304560,1790003182,{"code":4,"msg":81,"data":82},"success",[83,88,93,98,103,108,113,118,123],{"id":84,"doc_module":22,"doc_module_name":25,"category_name":85,"show_sort_weight":86,"slug":87},11,"Presentations",90,"presentations",{"id":89,"doc_module":22,"doc_module_name":25,"category_name":90,"show_sort_weight":91,"slug":92},12,"Resumes",80,"resumes",{"id":94,"doc_module":22,"doc_module_name":25,"category_name":95,"show_sort_weight":96,"slug":97},14,"Invoices",70,"invoices",{"id":99,"doc_module":22,"doc_module_name":25,"category_name":100,"show_sort_weight":101,"slug":102},15,"Posters",60,"posters",{"id":104,"doc_module":22,"doc_module_name":25,"category_name":105,"show_sort_weight":106,"slug":107},16,"Social Media",50,"social-media",{"id":109,"doc_module":22,"doc_module_name":25,"category_name":110,"show_sort_weight":111,"slug":112},17,"Forms",40,"forms",{"id":114,"doc_module":22,"doc_module_name":25,"category_name":115,"show_sort_weight":116,"slug":117},18,"Letters",30,"letters",{"id":119,"doc_module":22,"doc_module_name":25,"category_name":120,"show_sort_weight":121,"slug":122},21,"Paper Templates",5,"papers-templates",{"id":124,"doc_module":22,"doc_module_name":25,"category_name":29,"show_sort_weight":4,"slug":125},158,"general-158",{"code":4,"msg":81,"data":127},{"doc_id":78,"user_id":128,"nickname":42,"user_avatar":129,"doc_module":22,"category_id":124,"category_name":29,"doc_title":10,"doc_description":12,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":26,"is_deleted":4,"is_public":22,"is_downloadable":22,"audit_status":22,"page_count":135,"language":136,"language_code":8,"site_id":7,"html_lang":8,"table_of_contents":137,"faqs":138,"seo_title":139,"seo_description":12,"update_tm":140,"read_time":141},687207024478,"https://ap-avatar.wpscdn.com/davatar_a8503ba1806abce46bf441b54a3ca4cd","\"No Tax on Tips\":  \nBudgetary, Distributional, and Tax Avoidance Considerations  \nSeptember 2024  \nKey Takeaways  \n1.  \nWhile both presidential candidates have expressed support for some form a tax exemption on tips, the effects of such a policy would depend on how it’s designed and implemented. Design questions include whether eligibility would be limited based on industry or income, as Vice President Harris has suggested, and whether the exemption would apply to payroll tax.  \n2.  \nAbout 4 percent of families report tips to the IRS, and those who do are disproportionately young, unmarried, and lower-income. This means that many tipped workers do not pay income tax to begin with and would not benefit from a new deduction.  \n3 We estimate that less than 3 percent of families would benefit from a broad  \nbased income tax deduction for tips in 2026. The average tax cut for families. who benefit would be roughly $1,700, though for bottom-quintile families that  \nnumber is just $200.  \n4 Before considering behavioral feedback, an income tax deduction for tips would  \ncost more than $100 billion over the next decade. Restricting eligibility to  \n. workers in the leisure and hospitality industries would reduce the cost by more than 40 percent.  \n5 A tax break that favors one form of income over others creates opportunities  \nfor tax avoidance. Back-of-the-envelope calculations suggest that the true cost  \n. of the proposal would be larger than the static cost, though the exact amount depends on the willingness of customers to trade lower prices for higher tips.  \nIntroduction  \nBoth candidates in the 2024 presidential election have expressed support for a tax exemption on tips. Former President Trump initially floated the idea at a Nevada campaign rally in June, after which several members of Congress have offered legislative interpretations: two bills would exempt tips only from individual income tax and another would additionally exempt tips from payroll taxes. Then, at a campaign rally in early August, Vice President Harris expressed support for the idea, specifying that the exemption would apply to “service and hospitality workers.” The Harris campaign later suggested that the tax break would include some form of limit based on overall income.  \nMany tax policy and budget experts have weighed in on the idea. Some have ballparked costs based on aggregate data from the IRS. Others have commented on how this kind of tax break is horizontally inequitable and would encourage inefficient tax avoidance behavior. And an earlier piece for the Budget Lab looks at the economic and demographic characteristics of workers in tipped occupations, emphasizing the large share of tipped workers who pay no income tax to begin with.  \nThis report adds to the ongoing policy conversation by offering a quantitative look at the idea of “no tax on tips”. First, we analyze survey data to understand the economic, demographic, and industry characteristics of tipped workers. Next, we use that data as a basis for estimating the static budgetary and distributional effects of several interpretations of the proposal, including one with an industry-specific limitation. Finally, we highlight potential avenues for tax  \navoidance under the proposed exemption, ballparking the size of these effects and using this setting an instructive example of how budget analysts try to account for behavioral feedback in scores.  \nCharacteristics of Tipped Workers  \nThe budgetary and distributional effects of exempting tips from tax depend on who earns tipsand how much tax they pay under current law. For example, if tips are disproportionately earned by those with low taxable income and marginal tax rates, the tax relief and associated revenue costs will be lower, all else equal. But data on this topic is limited. While the IRS reports certain aggregated datapoints on the tip income of W2 employees, the IRS microdata underlying our tax model contains no information on this topic. ","cbCaiebScxcM2xxo","https://ap.wps.com/l/cbCaiebScxcM2xxo","pdf",1068228,25,"English","# Key Takeaways\n# Introduction\n# Characteristics of Tipped Workers\n## Tax-relevant facts about tipped workers\n### Younger, unmarried, and lower-earning workers are more likely to earn tips\n### Most tipped workers earn a majority of income from sources other than tips","[{\"question\":\"What policy design choices matter most for a tax exemption on tips?\",\"answer\":\"The report emphasizes that effects depend on eligibility rules (such as limits by industry or income) and whether the exemption applies to payroll tax as well as individual income tax.\"},{\"question\":\"How common are tip reporting and who tends to report tips to the IRS?\",\"answer\":\"About 4 percent of families report tips to the IRS, and those who do are disproportionately young, unmarried, and lower-income, meaning many already pay little or no income tax.\"},{\"question\":\"Why could a tips tax break increase tax avoidance?\",\"answer\":\"The report explains that favoring one type of income over others can create opportunities for tax avoidance, with the real cost potentially exceeding static estimates depending on customer behavior.\"}]","No Tax on Tips - Budgetary, Distributional, and Tax Avoidance Considerations | PDF",1789814864,9]