Now that Vice President Kamala Harris has voiced her copy of former President Donald Trump ’s “no tax on tips” proposal, tax-cut talk colors much of the media attention.
A common refrain asks whence the money for the deficit will come if Congress passes rules that allow for these changes. While this question does not quiet the thousands in support of the idea at rallies , others in the policy sphere push back for various reasons. Apart from budget considerations, opponents doubt whether cutting taxes on tips would help rather than hurt service workers’ wages and whether the idea appears fair alongside other low, non-tipped incomes.
Given the working-people cries that characterize both campaigns this election season, the reality is that there will be moves for tax cuts from either party, it just depends what form they take. These efficacy and externality concerns are potent counter-points on their own, but direct budget deficit questions still drive home the opposition. Some negative economic effects will be unavoidable, so long-term societal returns are significant.
If it is a question of priority, the Child Tax Credit should take pride of place. Scholars have noted for years the importance of CTC expansion to pro-family policy, while Sen. J.D. Vance (R-OH) echoes the same concept. Examined beside tipped-income tax cuts, the CTC offers fewer immediate reservations as well as further-reaching welfare impacts.
Tipped workers tend to be younger . Not only does this statistic reduce the efficacy of what a removal of taxes on tips looks to achieve, but it holds implications for their longer-term aspirations. Yes, it may help them reach a more comfortable living in their present circumstances. A comfortable wage, however, is something for which it is easy to settle and delay one’s aspirations, such as marrying . Young people still figuring out what to do with their lives are particularly susceptible to this effect: They try just to “get by” for a while, and end up not leaving the tipped-wage workforce. In terms of providing a better living, the CTC can do so just as well as a “no tax on tips” act, and does so more directly.
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Tipped-wage occupations are generally unattractive to people looking for a job — if they weren't, there would be much less populist appeal to their reform. It follows that neither are what they usually sought as long-term careers, but as transitional arrangements. They should not be built into traps that disincentivize family formation, no matter how well-intentioned. In contrast, a CTC makes it easy for people to navigate the workforce at the same time that they pursue marriage and family life, with lessened financial strain.
The reason we want more money in people’s pockets is not for immediate spending returns, but for human flourishing. A boost to the economy is helpful, a sign we are doing things right. But the good of the family is deeply entwined with political life, and so supporting families must be at the heart of any tax policy.
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