Consider This from NPR How would banning taxes on tips actually work?
Aug 25, 2024
An intriguing discussion emerges around eliminating taxes on tips, bringing unlikely political agreement from both presidential nominees. The complexities of proposed changes are examined, revealing concerns about fairness and potential loopholes. The impact on compensation for workers like estheticians is also explored, alongside historical context on similar tax changes. The conversation raises significant questions about the financial landscape for tipped workers and the bipartisan support pushing for reform.
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Esthetician's Tip Income
- Shannon Lee, an esthetician, earns about a third of her income through tips.
- A proposal to make tips tax-free appeals to her and could impact fee structures.
Tax Avoidance
- Tax expert Howard Gleckman warns that people will try to categorize their income to minimize taxes.
- He cites historical examples like the growth of employer-sponsored health insurance due to the 1942 Stabilization Act.
Carried Interest Loophole
- Hedge fund managers and private equity partners often structure their compensation to be taxed at the lower capital gains rate.
- This is often referred to as the carried interest loophole.