Horsford’s TIPS Act Seeks to Uplift Service Workers by Eliminating Subminimum Wage

Congressman Steven Horsford (NV-04)Photo byOffices of Congressman Steven Horsford

Congressman Steven Horsford (NV-04) has introduced a groundbreaking bill to end the subminimum wage for tipped workers and remove taxes on tips, aiming to provide economic justice for millions.

In an ambitious legislative push, Congressman Steven Horsford unveiled the Tipped Income Protection and Standards (TIPS) Act, a measure designed to eliminate the subminimum wage and abolish the income tax on tips for tipped workers. The bill addresses the widespread reliance on customer gratuities to meet federal minimum wage requirements, a practice that leaves many workers, especially women and people of color, in financial precarity.

A Broken Wage System for Millions

Under current federal law, tipped workers in many states are paid as little as $2.13 an hour, a rate significantly lower than the federal minimum wage of $7.25. In theory, tips from customers should bridge this wage gap, but for over 4 million workers in industries like food service, bartending, and hospitality, this system often results in erratic and insufficient income.

At a press conference announcing the bill, Horsford remarked, “No one working full-time in America should live in poverty, yet millions of tipped workers do just that—many of whom are women and people of color. The TIPS Act is about fairness, dignity, and economic justice.”

The disproportionate impact on marginalized communities is stark, particularly in states such as Texas, Virginia, and Alabama, where the $2.13 tipped minimum wage remains the standard. In these regions, tipped workers, often women and people of color, face a cycle of financial instability, exacerbated by the unpredictability of customer tips.

Tipping's Legacy: Rooted in Inequality

The origins of the subminimum wage are controversial. Saru Jayaraman, President of One Fair Wage and Director of the UC Berkeley Food Labor Research Center, highlighted the racial undertones, calling the subminimum wage a “direct legacy of slavery.” Jayaraman argued that the practice has long been used to keep certain groups, particularly women of color, in poverty.

The TIPS Act, she believes, represents a pivotal moment. “By eliminating this unjust practice and ensuring workers are not taxed on their tips, the TIPS Act gives workers the chance to earn a fair living. It’s time to stop asking customers to subsidize wages and start holding corporations accountable,” Jayaraman said.

States Leading by Example

Not all states follow the federal subminimum wage standard. Nevada, California, and Washington have taken a more progressive approach, abolishing the subminimum wage for tipped workers altogether. The results have been compelling.

In Nevada, where the same minimum wage applies to all workers, restaurants have seen improvements in both employee productivity and retention. Research also points to higher customer satisfaction when workers are fairly compensated, as employees experience less financial stress and are more engaged. Contrary to concerns raised by industry critics, these states have found that eliminating the subminimum wage leads to a more sustainable and successful restaurant industry.

A nationwide shift, however, is proving challenging. For states that continue to enforce the $2.13 subminimum wage, workers remain caught in a system dependent on tips, often without any guarantee of a livable wage.

Broader Economic and Social Impact

The TIPS Act isn’t just about wages—it’s part of a broader strategy to narrow the racial and gender income gap in America. By ensuring a livable wage for tipped workers, the legislation aims to boost economic equity, allowing millions to escape poverty and engage fully in the economy.

Horsford’s move comes at a time when the cost of living continues to rise, making economic justice a top issue for voters across the country. “With the cost of living and affordability crisis being the number one priority for voters this election cycle, this bill is critical to ensuring workers can pay their bills, feed their families, and live with dignity,” Jayaraman noted.

Critics of the bill, mainly from industry lobbyists, argue that raising wages for tipped workers will increase operational costs for businesses. However, studies from states like Nevada and California suggest otherwise. In these regions, businesses adapted and even thrived, showing that fair wages and economic success are not mutually exclusive.

A Moment for Change

As the TIPS Act moves forward in Congress, it faces opposition from those who argue that higher wages could harm small businesses. However, advocates counter that workers’ financial well-being should not depend on the charity of customers, and the bill is a necessary step toward achieving economic justice for millions of Americans.

The future of the TIPS Act may well serve as a litmus test for how committed the U.S. is to resolving deep-rooted economic inequalities. Whether it succeeds or fails, the conversation around tipped wages is unlikely to quiet down anytime soon.

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