Two months after a group of Republican senators, led by Sen. Ted Cruz, introduced the “No Tax on Tips Act,” which would exempt cash tips from federal income tax requirements, Congressman Steven Horsford (D-Nev.) introduced his own version to the House of Representatives. The Tipped Income Protection and Support (TIPS) Act would not only end the income tax on gratuities tipped workers receive, but would also eliminate the subminimum wage for tipped workers across the United States.
The subminimum wage has been a contentious issue that has been raised both at the federal and state levels. Most recently, advocacy group One Fair Wage tried to get legislation that would eliminate the tip credit on the ballot in Ohio, but it failed to happen. Additionally, in August, a United States federal appeals court struck down the Department of Labor’s revised 2021 80/20 rule, which had only allowed employees to be paid the federal subminimum wage of $2.13 an hour to supplement earned gratuities while workers were performing tip-supporting tasks for less than 20% of their workweek.
"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,” Rep. Horsford said in a statement. “The TIPS Act is about fairness, dignity, and economic justice. By eliminating the subminimum wage, we can ensure that every worker is paid fairly for their labor without relying on the uncertainty of tips."
In Horsford’s home state of Nevada, the subminimum wage has already been eliminated, alongside California and Washington. Advocates for the restaurant industry, however, feel that these two issues are not related (the subminimum wage and income taxes on tips) and that the federal elimination of the tip credit could potentially harm restaurant workers.
“The elimination of the tip credit is a lose-lose-lose proposal for restaurant owners, tipped workers, and customers alike,” Sean Kennedy, executive vice president for public policy at the National Restaurant Association said in a statement. “It will limit the earning potential of servers; it will force operators to cut hours and jobs; and it will increase menu prices for consumers.”
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