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How Trump’s ‘No Tax on Tips’ Could Backfire for the Working Class

History tells us that tax cuts are more likely to lead to perverse results when they favor one kind of income over another.

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By Ben Steverman

March 13, 2025 at 9:00 AM UTC

Updated on

March 13, 2025 at 11:59 AM UTC

This article is for subscribers only.

This article is part of the April 1, 2025 issue of businessweek.

The way Donald Trump tells the story, a young waitress at his Las Vegas hotel restaurant last year mentioned that tax collectors were hounding her “viciously” for tip income. “ ‘You know, sir, you should have no tax on tips,’ she said. I said, ‘What did you just say? Say those words again,’ ” the president recalled earlier this year. “ ‘You just won the election for me.’ ”

“No tax on tips” entered Trump’s stump speech in June, later joined by no taxes on overtime and on Social Security and a host of other generous promises. Each raised questions that the candidate didn’t try to answer in any detail. Now that he’s back in the White House, Trump, along with congressional Republicans, faces the challenge of turning his slogans into sections of the Internal Revenue Code. It won’t be easy. Nothing can set off a chain of unintended consequences quite like revising tax rules.