H.R.558 - Tip Tax Termination Act (119th Congress)
Summary
H.R.558, the Tip Tax Termination Act, proposes amending the Internal Revenue Code of 1986 to exclude certain tipped wages from income taxes for five years. The bill, introduced in the House of Representatives, aims to provide tax relief to individuals in professions that rely on tips, such as cosmetology, hospitality, and food service. The exclusion is capped at $20,000 per individual per year and would be in effect from January 1, 2025, to December 31, 2029.
Expected Effects
If enacted, H.R.558 would reduce the tax burden on tipped workers, potentially increasing their disposable income. This could stimulate spending in the short term. However, it would also reduce federal tax revenue, potentially impacting government programs and the national debt.
Potential Benefits
- Increased disposable income for tipped workers.
- Potential stimulus to local economies through increased spending.
- Simplification of tax filing for affected individuals.
- Could incentivize more people to enter tipped professions.
- May reduce instances of underreporting tip income.
Most Benefited Areas:
Potential Disadvantages
- Reduced federal tax revenue, potentially increasing the national debt.
- Potential for abuse or misclassification of wages as tips.
- Complexity in distinguishing eligible vs. ineligible tips.
- Disproportionate benefit to higher-earning tipped employees.
- May create pressure to extend the termination date, leading to long-term revenue loss.
Most Disadvantaged Areas:
Constitutional Alignment
The bill falls under the purview of Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1 of the Constitution. The uniformity clause might be relevant if the application of the tax exclusion is not uniform across all states. The bill does not appear to infringe on any individual rights or liberties protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).