The no tax on tips provision of Donald Trump’s budget cannot be the pro-labor gift that the president has made it out to be while the rest of the bill slashes health care and other social programs for lower-income people. Representative Alexandria Ocasio-Cortez shed some light as to why that’s the case.
I’m still unclear how this will be implemented, but even if the full tax bill of a single person (highest tax bracket group) making $25,000 was negated, it would only save them $1,298.
On one hand, that feels like a tiny sum. On the other, that is 5% of their annual income (and i know a 5% raise on my end would make a substantial difference in my own life).
Used this calculator to run the numbers
I played around with incomes in the $25K-$50K range and came up with similar numbers to yours. Basically, someone in that range who makes most of their income from tips stands to save anywhere from $1K-$3K, which could be significant. As AOC pointed out though, that could quickly turn into a net loss if you lose Medicaid benefits.