A group that keeps an eye on the budget said on Monday that Donald Trump’s new plan to not tax tips would add $150 billion to $250 billion to the government budget deficit over 10 years.
The nonpartisan Committee for a Responsible Federal Budget says that the plan’s effect on the deficit would be about the same as or even bigger than the $172 billion in lost revenue that is expected from not extending the tax cuts for small businesses and other “pass-through” companies that end next year.
The tip tax break is Trump’s latest attempt to get younger people to vote for him. He said it at a campaign rally in Nevada, which is a key presidential battleground and has the most people working in food service and lodging, businesses where workers have traditionally relied on tips.
To get the word out, the former president said, “Every time you leave a tip for the next five months, write on the receipt, ‘Vote for Trump because there’s no tax on tips.'” He said this at an event in Florida on Friday night to celebrate his 78th birthday.
The CRFB said the price could go up a lot if employers and workers took advantage of the tax break by shifting more of their general pay from wages to tips.
The group thought that if tips went up by 10%, the cost would go up to $275 billion, and if tips went up by a second and pay went down by the same amount, the federal government would lose $500 billion.
The price tag makes it financially impossible to carry out Trump’s plan. The likely Republican presidential candidate already wants to extend the tax cuts that were put in place in 2017. The Congressional Budget Office says that doing so would cost $4.6 trillion over 10 years.
On Thursday, Trump brought the idea of dropping the 21% corporate tax rate to 20% to the attention of top business leaders. The same day, he told Republicans in the House that he wanted to raise tariffs on imported goods to make up for the lost tax income.
Republicans don’t agree on whether these kinds of tax cuts should be paired with budget cuts or other ways to bring in money. The CBO says that the tax cuts of 2017 added $1.5 trillion to budget shortfalls and were not fully paid for.
House Speaker Mike Johnson and other important Republicans want to slow the growth of the US national debt by cutting big chunks of government spending right away in the new Trump administration.
“Next year there will be a tough debate,” said Jodey Arrington, chairman of the House Budget Committee and a Republican from Texas. “Things are very different now than they were in 2017 because of the amount of debt and the interest rates.”
Source: Bloomberg