When Biden panders to his lower-income supporters, he targets zeroing out their student debt and regulating credit card companies with further restrictions on their ability to charge for overdrafts and the like.
When Trump panders to his lower-income supporters, he promises to exempt tips from income taxation, as he did recently in Las Vegas.
This may be the most obvious difference between left- and right-styles in politicking to the masses, good-ol’-fashioned vote-buying or its twin: leftists forgive debts and add regulations, rightists reduce taxes.
Like me, you may, at first blanch, prefer the latter form of pandering, but Eric Boehm, at Reason, offers some reasons not to look so kindly on Trump’s pandering. First, and most obviously: “Reducing revenue without identifying offsetting spending cuts means Trump is merely promising to borrow more heavily.”
A bigger challenge comes later: “On the surface, that sounds great. But there’s already one likely unintended consequence: A lot more income will suddenly be reported as tips. Any time a government gives preferential tax treatment to one type of economic activity, you tend to get a lot more of that type of economic activity. Does that mean we’ll have an entirely tip-based economy?” The answer is a likely No.
Oddly, Mr. Boehm doesn’t address one obvious element: Tips aren’t wages and they aren’t profits. Tips are gifts. They aren’t determined by employers and they aren’t specified by employees. And gifts aren’t taxed as income like other income is.
So letting people who accept tips in the course of their labors not pay taxes on them is really, really hard to object to.
In fact, I don’t object.
This is Common Sense. I’m Paul Jacob.
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5 replies on “Trump to Ax Tip Tax”
So you’re against the tax cut if it’s from the left and for the poor? That should be popular, not.
Yours is the greatest bald non-sequitur that I recall ever seeing in any comment to this ‘blog.
In reply to Julius Merritt:
Well, that is the most witless thing I’ve seen today: “So you’re against the tax cut if it’s from the left and for the poor? That should be popular, not.”
Paul Jacob was talking about two distinct ways of pandering to “lower-income” folks: tax cuts (on the right) and debt forgiveness and increased regulation (on the left). He said nothing about tax cuts on the left.
Nothing. Because the left rarely offers tax cuts. Debt forgiveness is not a tax cut. It will entail a tax hike for others. It’s a subsidy. Increased regulation may (just maybe, for a short while) help its intended beneficiary, but it raises costs to credit card companies but is not a tax, technically or even by a stretch.
When I see someone miss the point of a clear essay, I wonder if the person is so partisan as to be unable to see an inconvenient point, or has a deep personal problem.
Which is it?
Dan Hannan at johnlocke.org (https://www.johnlocke.org/biden-spreads-myth-of-trickle-down-economics/) writes about Republican President Coolidge: “In 1921, Americans earning over $100,000 paid federal income tax at a rate of 73%. By the time Silent Cal left office in 1929, that rate had been cut to 24%. The result? The tax yield rose from $700 million to more than a billion, and the proportion paid by those earning more than $100,000 actually rose from 30% to 65%. In other words, if you want the rich to pay more, whether in absolute or relative terms, flatten your tax rates.” And,
“…it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.” That was President John F. Kennedy, in 1962. He was a Democrat. Why would he say that? Then again, like Hillary said: “What difference, at this point, does it make?”
No objection here. People dependent on tips most likely make a smaller wage amount and so rely on tips to pay their bills. You’ll most likely receive better service.