Trump ends taxes on tips?

Donald Trump has made eliminating federal taxes on tips a key campaign promise, introducing it during rallies and promoting it heavily on social media. The proposal has gained traction with some Republican legislators, who have introduced bills to implement this change. However, significant questions remain about both the feasibility and likelihood of implementation by the market resolution date of April 29, 2025. The analysis needs to consider multiple factors: Trump must first win the 2024 election, then either sign legislation passed by Congress or take executive action to eliminate these taxes. The substantial estimated cost ($150-250 billion over 10 years) and potential opposition from both Democrats and fiscal conservatives create significant hurdles. Additionally, many lower-income tipped workers already pay minimal federal income tax, suggesting the proposal may have less impact than claimed.

Economic Background

• Current economic environment shows persistent inflation concerns and budget deficit issues
• Service industry remains a major employer, with tipped workers facing unique tax circumstances
• Many tipped workers (nearly 50%) earn below federal income tax threshold
• Estimated revenue impact of $150-250B over 10 years according to CRFB

Outcome Analysis

"Yes" Scenario (39.5% current probability)

Requirements:

• Trump wins 2024 election
• Successfully implements change by April 29, 2025 through either:
  • Congressional legislation
  • Executive action

Supporting factors:

• Active Republican legislative proposals already exist
• Strong campaign commitment from Trump
• Popular with service industry voters
• Republican support in Congress

Challenges:

• Narrow implementation window (Jan 2025 - April 2025)
• Significant cost to federal budget
• Potential legal challenges to executive action
• Need for Congressional cooperation

"No" Scenario (60.5% current probability)

More likely due to:

• Short timeline for implementation
• Multiple failure points (election, legislation, execution)
• Budget impact concerns
• Democratic opposition
• Questions about executive authority
• Possible legal challenges

Key Factors to Watch

1. Election Results

• Presidential race outcome
• Congressional control
• State-level results in service industry states

2. Legislative Progress

• Movement on existing bills
• Committee hearings
• Republican unity on proposal

3. Economic Conditions

• Federal deficit trends
• Service industry employment
• Inflation rates
• Tax revenue projections

4. Political Developments

• Trump's legal situations
• Coalition building
• Democratic response
• Industry group positions

Recent Developments

• Trump campaign actively promoting via social media (#NoTaxOnTips)
• Republican legislators introduced relevant bills
• Some industry groups expressing skepticism
• Economic analysis showing limited benefit for many workers