Vice President Harris’ proposal to eliminate tip taxes and increase the federal minimum wage could cost as much as $200 billion over a decade, a budget watchdog estimated in an analysis.
The Committee for a Responsible Federal Budget (CRFB) estimated on Monday that exempting tips from federal revenue, as well as increasing the minimum wage, could add between $100 billion and $200 billion to the country’s deficits over a 10-year period.
The analysis was released after Harris pledged over the weekend that, if elected president, she would work “to raise the minimum wage and eliminate tip taxes for service and hospitality workers.”
His comments came weeks after former President Trump also pledged to prioritize ending tip taxes if he wins back the White House later this year, saying: “To the hotel workers and people who receive tips, you will be very happy . ”
At the time, the CRFB estimated that Trump’s plan could lead to a $150 billion to $250 billion reduction in federal revenue over a decade if it meant that tip income would be exempt from federal income and payroll taxes.
On the other hand, the CRFB noted in its Monday analysis that, “based on communications with the Harris campaign, tips would be exempt from income tax but would remain subject to payroll tax under the proposal”.
He also pointed to comments from a campaign official signaling that Harris would “work with Congress to establish an income limit and various protections around the tax exemption on tip income.”
“As president, she would work with Congress to craft a proposal that includes an income cap and strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways that try to take advantage of the policy,” one official said. The Washington Post.
The Hill has reached out to Harris’ campaign for comment.
The group noted that the estimate does not take into account “changes in tipping behavior” and that Harris’ “proposal could further increase deficits once behavioral effects are fully incorporated.”
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