The Republican senate of the US has unanimously passed the “no tax on tips” bill on Tuesday. Surprisingly, the “no tax on tips” provision has received unanimous bipartisan acceptance. The proposed bill rule aims to remove federal income taxes on tips.
‘No tax on tip’, what is it?
It was initially introduced by Republican senator Ted Cruz in January, with democratic co-sponsors Nevada senators Jacky Rosen and Catherine Cortez Masto. The act postulates that workers in the bottom 60 per cent of the income distribution would have an average tax cut of US$ 1,260 if tips are to be excluded from income taxes.
This proposed law would allow a tax deduction of up to US$ 25,000 for cash tips that employees declare to their employers for payroll tax withholding. A large share of restaurant workers, bartenders, hotel staffers, barbers, salon workers, tour guides, delivery and Uber drivers are likely to benefit from this.
The national restaurant association, a powerful trade group that is against the minimum wage for workers, has shown assent for the proposed bill.
While certain interest groups and labour economists have come against the idea of “no tax on tips”
As the NYT News Service reported, Erika Polmar, executive director of the independent restaurant coalition, said, "The Fair Labor Standards Act specifies that you can only receive tips if you are customer facing, so that means cooks, dishwashers, porters and bussers, in some cases, are all not receiving tips,". Polmar argues that servers are going to get a substantial tax credit, while cooks will be excluded, and restaurants will find it difficult to increase minimum wages to make up that difference.
Why is the ‘unanimous consent’ important?
As NBC reported, Senator Jacky Rosen proposed the bill in the senate for an “unanimous consent” request on Tuesday. This entails the bill being blocked by any senator. This procedure is duly followed for more mundane matters, unlike tax bills, for which a much more complex protocol is stuck to. The legislation was passed as the other 99 present senators did not object to Rosen’s proposal.
Rosen stated, “ Nevada has more tipped workers per capita than any other state. So this bill would mean immediate financial relief for countless hard-working families”.
The US tax code has always been filled with loopholes that benefit certain types of incomes or businesses over others, leading to several Washington-based think tanks opposing this proposed bill as a tax-exemption effort.
‘No tax on tip’, what is it?
It was initially introduced by Republican senator Ted Cruz in January, with democratic co-sponsors Nevada senators Jacky Rosen and Catherine Cortez Masto. The act postulates that workers in the bottom 60 per cent of the income distribution would have an average tax cut of US$ 1,260 if tips are to be excluded from income taxes.
This proposed law would allow a tax deduction of up to US$ 25,000 for cash tips that employees declare to their employers for payroll tax withholding. A large share of restaurant workers, bartenders, hotel staffers, barbers, salon workers, tour guides, delivery and Uber drivers are likely to benefit from this.
The national restaurant association, a powerful trade group that is against the minimum wage for workers, has shown assent for the proposed bill.
While certain interest groups and labour economists have come against the idea of “no tax on tips”
As the NYT News Service reported, Erika Polmar, executive director of the independent restaurant coalition, said, "The Fair Labor Standards Act specifies that you can only receive tips if you are customer facing, so that means cooks, dishwashers, porters and bussers, in some cases, are all not receiving tips,". Polmar argues that servers are going to get a substantial tax credit, while cooks will be excluded, and restaurants will find it difficult to increase minimum wages to make up that difference.
Why is the ‘unanimous consent’ important?
As NBC reported, Senator Jacky Rosen proposed the bill in the senate for an “unanimous consent” request on Tuesday. This entails the bill being blocked by any senator. This procedure is duly followed for more mundane matters, unlike tax bills, for which a much more complex protocol is stuck to. The legislation was passed as the other 99 present senators did not object to Rosen’s proposal.
Rosen stated, “ Nevada has more tipped workers per capita than any other state. So this bill would mean immediate financial relief for countless hard-working families”.
The US tax code has always been filled with loopholes that benefit certain types of incomes or businesses over others, leading to several Washington-based think tanks opposing this proposed bill as a tax-exemption effort.
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