Harris plan to nix taxes on tips, raise minimum wage could cost up to $200 billion: Analysis

Vice President Harris’s proposal to nix taxes on tips and raise the federal minimum wage could cost up to $200 billion over a decade, a budget watchdog estimated in an analysis.

The Committee for a Responsible Federal Budget (CRFB) estimated Monday that exempting tip income from federal income, as well as increasing the minimum wage, could add between $100 billion and $200 billion to the nation’s deficits in a 10-year window.

The analysis was rolled out after Harris vowed over the weekend that, if elected president, she would work “to raise the minimum wage and eliminate taxes on tips for service and hospitality workers.”

Her comments come weeks after former President Trump also vowed to prioritize ending taxes on tips if he wins back the White House later this year, saying then, “For those hotel workers and people that get tips, you’re going to be very happy.”

At the time, the CRFB estimated Trump’s plan could lead to a decrease of $150 billion to $250 billion in federal revenues over a decade if it meant tip income was exempted from federal income and payroll taxes.

By contrast, the CRFB noted in its analysis Monday that, “Based on communications with the Harris campaign, tips would be exempt from the income tax but remain subject to the payroll tax under the proposal.”

It also pointed to comments from a campaign official signaling Harris “would work with Congress to establish an income limit and various guardrails on the exemption of tip income from taxes.”

“As president, she would work with Congress to craft a proposal that comes with an income limit and with strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways to try to take advantage of the policy,” an official told The Washington Post.

The Hill has reached out to the Harris campaign for comment.

The group noted the estimate doesn’t account for “changes in tipping behavior,” and that Harris’s “proposal could increase deficits more once behavioral effects are fully incorporated.”