S.129 - No Tax on Tips Act (119th Congress)
Summary
The "No Tax on Tips Act" (S.129) aims to amend the Internal Revenue Code of 1986 by providing a deduction for qualified tips received by individual taxpayers, up to $25,000 annually. This deduction would be available to both itemizers and non-itemizers. The bill also extends the employer social security tax credit to beauty service establishments and updates the minimum wage calculation for the tip credit.
Expected Effects
If enacted, this bill would reduce the tax burden on tipped employees, potentially increasing their disposable income. It would also provide a tax credit to employers in the beauty service industry, incentivizing job creation. The modification of withholding tables would reflect the new deduction, impacting tax revenue.
Potential Benefits
- Reduced tax liability for tipped employees, increasing disposable income.
- Extension of employer social security tax credit to beauty service establishments, potentially stimulating job growth in that sector.
- Simplified tax filing for tipped employees, as the deduction is available to both itemizers and non-itemizers.
- Encourages accurate tip reporting, as the deduction is tied to reported tips.
- Could lead to increased consumer spending due to higher disposable income for tipped employees.
Potential Disadvantages
- Potential reduction in federal tax revenue, which could impact government programs.
- Complexity in defining "qualified tips" and eligible occupations, requiring regulatory interpretation by the Secretary of the Treasury.
- The $25,000 deduction limit may disproportionately benefit higher-earning tipped employees.
- Potential for increased tax fraud if the deduction is not properly monitored and enforced.
- May create an uneven playing field between tipped and non-tipped workers.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the general welfare clause of the Constitution (Preamble), as it aims to improve the financial well-being of tipped employees. Article I, Section 8 grants Congress the power to lay and collect taxes, and this bill modifies the tax code within that framework. The bill does not appear to infringe upon any specific constitutional rights or limitations.
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).