By Howard Schneider and Ann Saphir

Two Decades of Stability for a Unionized Bartender

LAS VEGAS/RENO, Nevada (Reuters) – Two decades into her work as a unionized bartender in Reno, Nevada, Kristie Strejc enjoys job stability, preferred shifts, and sufficient income. Unlike many in the hospitality industry, she would benefit from proposed federal exemptions on tips from income tax. However, this isn’t swaying her vote, which she firmly casts for Vice President Kamala Harris, the Democratic candidate endorsed by Nevada’s influential Culinary Workers Union Local 226. In recent polls, Harris leads former President Donald Trump, the Republican contender, in this pivotal state.

“I’m at a point where I could either go on ‘this’ vacation or buy ‘this’ for the house … I could probably do a little more of both if I had that money in my pocket,” she shared in an interview regarding the tipped-income exemption. “That’d be a bonus, but I’m not going to vote because of one thing.”

Economic Proposals in a Battleground State

Both Harris and Trump are using competing economic proposals to attract various constituencies, including a tax exemption for overtime pay. Some of these ideas, however, are costly. The Committee for a Responsible Federal Budget estimates that eliminating taxes on overtime could reduce government revenue by $1.7 trillion from 2026 to 2035.

In states like Nevada, where the hospitality industry still constitutes more than 20% of jobs, the proposal to exempt tips has been met with indifference. David Schmidt, chief economist for the Nevada Department of Employment, Training, and Rehabilitation, noted that out of approximately $95 billion in annual wages reported in 2023, only around 1.5% came from tips.

Working-Class Concerns

Jeremy Gelman, a political science professor at the University of Nevada, Reno, interprets Trump’s proposal as an attempt to create uncertainty among the 60,000 members of the Culinary Workers Union, whose effective voter mobilization has propelled support for Harris. Gelman suggests that the economy’s current state, while not perfect, is not a recession, thus blunting any advantages derived from either candidate’s proposals.

Ted Pappageorge, secretary-treasurer of the Culinary Workers Union, contends that Trump’s proposal lacks substance. He argues that the issue is more complex than merely eliminating taxes on tips, noting that it ties into larger national problems like low wages and assisting lower-income families.

The Impact and Perception of Tax Exemptions

The Internal Revenue Service hasn’t published data on tipped income since 2018, when around 6.1 million workers reported $38.3 billion in tips for Social Security payroll taxes. Recent research from the Budget Lab at Yale indicates that only 3% of taxpayers nationwide might benefit from a tipped income exemption, with numerous other tipped workers earning too little to owe federal taxes.

The implications of these proposals will depend on the specifics of tax changes and the reactions from workers and employers. Harris has mentioned an income limit for exemptions, which would help reduce the federal deficit but also limit the number of beneficiaries. Economists suggest that more effective ways exist to uplift low-wage workers, like raising the minimum wage or expanding child care and earned income tax credits. They argue that exempting tips from taxation would not substantially help most low-income earners.

A Call for Focus on Inflation

Mike Bosma, a Reno-certified public accountant and Trump supporter, believes the tipped earnings exemption is merely a tactic to gather votes, diverting attention from inflation issues affecting small business owners. Meanwhile, in Las Vegas, union members like Rocelia Mendoza are mobilizing to support Harris, citing the burden of taxes on their earnings as a critical issue affecting their families.

Mendoza stated, “Taxes take ‘too much’ from the just-over $16 an hour I earn, and I’d love to ‘make a little bit more money for my family.'” However, she expresses distrust in Trump’s potential to deliver improvement.

“My sister, my granddaughter, my husband, all my family are supporting Kamala Harris,” Mendoza concluded.