In Nevada, Where Hospitality Reigns, Tipping Is Not the Concern – By Reuters

By Howard Schneider and Ann Saphir

LAS VEGAS/RENO, Nevada – After two decades as a unionized bartender in Reno, Kristie Strejc enjoys job security, preferred shifts, and a stable income—benefits that make her less reliant on the potential tax exemptions for tips proposed by U.S. presidential candidates. Despite this, her support remains firmly with Vice President Kamala Harris, the Democratic candidate backed by the influential Culinary Workers Union Local 226, which is currently leading in polls against former President Donald Trump in this crucial state.

When asked about the possible tax exemption for tipped income, Strejc remarked, "I’m at a point where I could either go on this vacation or buy that for the house. I could probably do a little more of both if I had that money in my pocket. That’d be a bonus, but I’m not going to vote because of one thing."

As Harris and Trump present competing economic plans—including tax exemptions for tips and overtime pay—the effectiveness of these strategies for capturing voters remains to be seen. However, the Committee for a Responsible Federal Budget recently highlighted the high costs of such proposals, estimating that eliminating taxes on overtime could reduce government revenue by $1.7 trillion from 2026 to 2035.

In Nevada, where the hospitality sector—which relies heavily on tips—accounts for over 20% of employment, the proposal to exempt tips from taxation has been met with skepticism. David Schmidt, chief economist for the Nevada Department of Employment, Training, and Rehabilitation, noted that only about 1.5% of the state’s $95 billion in annual wages comes from tips, suggesting that the overall impact may be minimal.

Jeremy Gelman, a political science associate professor at the University of Nevada, Reno, views Trump’s proposal as an attempt to create uncertainty among union members. He argues that the presence of similar proposals from both candidates diminishes any competitive advantage, particularly as the state of the economy remains stable but not extraordinary.

Ted Pappageorge, secretary-treasurer of the Culinary Workers Union, expressed doubt about the value of Trump’s proposal, suggesting it oversimplifies a complex issue that is intertwined with broader concerns about wages for tipped workers. Pappageorge emphasized that the current system already challenges tipped workers, who often earn fluctuating incomes based on customer generosity, and raised concerns over the lack of a guaranteed minimum for these employees.

While Nevada is among a handful of states that ensures tipped workers receive at least the minimum wage, union leaders maintain that this issue must be viewed within a larger context of fair wages and taxation policies.

The Internal Revenue Service hasn’t released detailed figures on tipped income since 2018, when 6.1 million workers reported a total of $38.3 billion in tips for Social Security payroll taxes. Research from Yale’s Budget Lab indicates that only about 3% of taxpayers nationwide might benefit from a tipped-income tax exemption, with many low earners potentially not owing any federal taxes.

The specific effects of such a change would depend on how the tax code is restructured and how both workers and employers adjust. Harris has indicated the exemption might include an income limit, which would reduce its impact on the federal deficit but also narrow the demographic that would benefit.

Both Harris and Trump view their proposals as ways to bolster the financial standing of low-wage workers. However, analysts from the Brookings Institution argue that better alternatives exist, including minimum wage increases or enhancements to childcare and earned income tax credits. They contend that removing taxes on tips would do little to support most low-income workers.

Mike Bosma, a certified public accountant and Trump supporter in Reno, criticized the tipped-income exemption as a mere "pandering for votes," advocating instead for a focus on rising inflation and its effects on small businesses.

In Las Vegas, Rocelia Mendoza, who works as an assistant server, joined fellow union members one afternoon to rally support for Harris. Mendoza noted her struggle with taxes taking significant portions from her earnings and expressed a desire to provide more for her family. Yet, she remains skeptical of Trump’s credibility, asserting her family’s unified support for Harris.