Why Many US Restaurants and Servers Are Standing Against the Republican ‘No Tax on Tips’ Proposal

Some parts of the U.S. restaurant industry are pushing back against President Trump’s idea to remove federal taxes on tips. They argue it doesn’t truly help most workers and misses larger issues about how tipped staff are paid.

The Independent Restaurant Coalition, a group representing about 100,000 restaurants and bars, has urged Congress to rethink this suggestion. Interestingly, even some workers who rely on tips are skeptical about making them tax-deductible. Elyanna Calle, a bartender from Austin, Texas, said this idea doesn’t help many workers. She pointed out that many in the kitchen, who often earn less, don’t receive tips at all, highlighting a major gap in support.

As of now, many lawmakers seem to back the idea. Both President Trump and former Vice President Kamala Harris included it in their campaigns. Last month, the House of Representatives approved a tax cuts package that would eliminate federal income taxes on tips. This applies to those earning under $160,000 in 2025. The Senate Finance Committee has a modified version, capping deductions at $25,000 and aiming to phase them out for those making over $150,000.

The National Restaurant Association, representing nearly 500,000 restaurants, supports this movement, claiming it would help over 2 million servers and bartenders. However, it’s worth noting that the entire U.S. restaurant industry has more than 12 million workers, raising questions about who truly benefits from this proposal.

The Independent Restaurant Coalition also advocates for removing taxes on service charges. About 15% of U.S. restaurants now add service charges to the bills, a trend gaining traction as restaurants seek fairer pay.

George Skandalos, a pizza restaurant owner in Idaho, is exploring new ways to fairly compensate his staff. He’s shifted to a 20% service fee that helps fund benefits like paid vacations. Skandalos believes the current proposal doesn’t consider restaurants trying to ensure fair pay for all workers. He’s calling for service charges to be tax-exempt as well.

On another front, some workers argue that the focus should be on raising wages. Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union in Las Vegas, stresses the need for restaurants to raise base pay to support kitchen workers. He advocates for a separate bill that would require restaurants to pay at least the federal minimum wage, currently set at $7.25 an hour. In many states, restaurants can pay tipped workers as low as $2.13 per hour.

Yolanda Garcia, a barista in Las Vegas, notes that tips can be unstable and having them tax-free could help her manage rising living costs. Calle shares similar concerns, fearing that without addressing base pay, the reliance on tips might grow, keeping wages low.

Overall, the conversation around tips and fair pay in restaurants continues to evolve, revealing deeper issues that affect many workers in the industry. For more on the complexities of the restaurant pay system, see resources from the National Restaurant Association here.

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