Rep. Steven Horsford (D-Nev.) recently announced plans to introduce the "TIPS Act," which seeks to eliminate federal income taxes on tips while raising the federal minimum wage to $12 per hour.
Horsford said Tuesday that he's spearheading a new legislative effort that could significantly impact tipped workers' earnings across the United States.
This proposal comes on the heels of public support for tax-free tips from former President Donald Trump and Vice President Kamala Harris, making it a bipartisan issue with potential nationwide implications.
Nevada Bill Aims to Eliminate Taxes on Tips
According to the New York Post, the "TIPS Act" aims to address two key issues facing service workers: the taxation of tips and subminimum wage. Under current federal law, tipped workers are often paid as little as $2.13 per hour, with the expectation that tips will help cover basic income needs.
Additionally, the act would exempt tips from federal income taxes, allowing workers to keep more of the money they earn.
Eliminating taxes on tips has gained traction in recent months, particularly after Trump first mentioned the idea at a rally in Las Vegas in June. Harris followed suit, expressing her support for the initiative and indicating that she would push for it if elected.
Their backing has brought national attention to the issue, which has long been a concern for workers in the service and hospitality industries.
According to Tom O'Saben, director of tax content and government relations for the National Association of Tax Professionals, the impact of this legislation could be substantial.
O'Saben estimated that tipped workers could see an additional $20,000 to $30,000 in tax-free income annually if the bill becomes law. This would be a significant boost for millions of workers who depend on tips as their primary source of income.
Horsford is well aware of the challenges facing service workers in his state, where tourism and hospitality are major economic drivers. Nevada has one of the country's highest concentrations of tipped workers, and many struggle to make ends meet under the current system.
By eliminating the subminimum wage and ensuring that tips are not taxed, Horsford believes his bill will provide much-needed relief to these workers.
Horsford says "TIPS Act" Still in the Works
The proposal has already garnered support from the Culinary Union Local 226, one of Nevada's most powerful labor unions. The union, representing many of the state's hospitality workers, has endorsed Horsford and Harris in their respective races.
Secretary-treasurer of the Culinary Union Ted Pappageorge praised the bill, noting that it recognizes the hard work of those in the hospitality industry, CNN reported.
However, there are still details to be worked out before the "TIPS Act" can be officially introduced. During a recent press call, Horsford acknowledged that the bill is still in development, particularly regarding the provisions related to Social Security and Medicare taxes.
He emphasized the importance of including safeguards to prevent workers in other occupations from misclassifying regular wages as tips to take advantage of the tax exemption.
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