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labor market
Senate-Passed No Tax on Tips Bill a 'Distraction From the Real Fight'
"We cannot tax-break our way out of an economy that continues to pay people less than it costs to live," said the group One Fair Wage.
May 21, 2025
After the U.S. Senate on Wednesday unexpectedly passed a bill that would exempt some tips from federal income tax, one labor group that campaigns for raising wages warned that while the bill would offer moderate relief to some Americans, it does not address the poverty wages facing many in the service sector—a message the group has hit on in the past.
"For all the bipartisan celebration, this bill is a distraction from the real fight," said Saru Jayaraman, president of One Fair Wage, in a statement on Wednesday. "If Democrats want to offer a true alternative, they need to say it loud and clear: it's time to raise the minimum wage and end the subminimum wage once and for all."
The bill passed by the Senate on Wednesday, the No Tax on Tips Act, would establish a new federal tax deduction of up to $25,000 for cash tips reported to employers by employees for the purposes of withholding payroll taxes. Qualified cash tips include "any cash tip received by an individual in the course of such individual's employment in an occupation which traditionally and customarily received tips on or before December 31, 2023," according to the bill text. Employees who made more than $160,000 in the prior tax year are not able to claim the deduction.
Currently, for tax purposes, tips are treated the same as regular wages. The bill was cosponsored by a bipartisan group of lawmakers and was passed by unanimous vote. It will now go to the House.
The idea of getting rid of federal taxes on tipped wages was touted by U.S. President Trump on the campaign trail and then-presidential candidate Vice President Kamala Harris also embraced the idea.
An analysis published last year by Yale's Budget Lab found that a "meaningful share" of tipped workers already pay nothing in federal income tax and that tipped work is a very small slice of the labor market.
Less than 4% of workers in the bottom half of hourly wage jobs, people making below $25 an hour in 2023, are in tipped jobs. Thirty seven percent of tipped workers in 2022 made so little that they paid zero in federal income tax before factoring in credits, according to Yale's analysis, and for non-tipped occupations, the equivalent share was much smaller—only 16%.
A report from One Fair Wage released last summer found that the annual income of tipped restaurant workers was so low that 46% of them do not earn enough to pay income taxes based on their individual income.
According to analysis from the Economic Policy Institute (EPI), in addition to helping relatively few workers, exempting taxes on tips could potentially undercut pay for many more workers, would encourage tax avoidance, and would reduce pressure on employers to increase base pay, among other concerns.
According to One Fair Wage, the true relief from the country's affordability crisis will come through raising wages, not through "tax gimmicks."
"We cannot tax-break our way out of an economy that continues to pay people less than it costs to live," the group added.
EPI also calls ending taxation on tips "a distraction from proven methods for supporting low-wage workers, like raising the minimum wage and eliminating the subminimum wage for tipped workers."
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Jobs Report Seen as 'Calm Before the Storm' as Trump Chaos Rattles US Economy
"Donald Trump is on track to be the first president to deliberately engineer a severe depression," warned one observer.
Mar 07, 2025
Labor Department figures released Friday show that U.S. job growth was weaker than expected last month as President Donald Trump worked to eviscerate the federal government—the nation's largest employer—and whiplashed financial markets with his erratic tariff announcements and reversals.
The U.S. added 151,000 jobs in February, fewer than the projected 170,000. But economists stressed that the numbers don't yet show the full extent of the damage Trump has done in the opening weeks of his second White House term.
"Unfortunately, this is the calm before the storm as trouble is clearly brewing and the pain will be felt across the economy in coming months," said Elise Gould, senior economist at the Economic Policy Institute.
While Gould stressed that "it's too soon" for jobs data to reflect the impact of the Trump administration's effort, in concert with billionaire Elon Musk, to gut the federal workforce—which has impacted some 100,000 government employees thus far—she said emerging numbers are still cause for concern.
"Nominal wage growth continues to hold steady, rising 4% over the year," Gould noted. "After falling steadily since its peak in June 2022, inflation has hovered around 3% for 20 months. As a result, average real wages have been rising. These gains could all be lost with the proposed tariffs and deportations."
The jobs data comes a day after Trump declared on his social media platform that "the Golden Age of America has just begun"—a message that appeared incongruous with economic trends and the perceptions of small business owners, investors, and working-class Americans facing a potentially massive tax hike and looming cuts to food assistance, Medicaid, and other benefits.
"Just one month on the job, warning signs are flashing across the Trump economy," Alex Jacquez, chief of policy and advocacy at the Groundwork Collaborative, said in a statement Friday. "Inflation is rising, consumer confidence is plummeting, business investment is pulling back, and now, the labor market is stalling."
"Instead of focusing on tax breaks for billionaires and giant corporations," Jacquez added, "Trump should find a way to get the economy back on track for working families before it spirals into recession."
"Trump has the power to issue commands in the domains that he controls, but he can't command the stock market to levitate, or prices to moderate, or consumers to feel confident, or people who have just been laid off to go out and shop."
Treasury Secretary Scott Bessent, a billionaire, conceded Friday that the U.S. economy is showing signs of wavering but insisted it's a "natural adjustment as we move away from public spending to private spending."
"We've become addicted to this government spending, and there's going to be a detox period," Bessent told CNBC.
But economists have warned that Trump's instability and constantly changing whims could result in a prolonged reduction in private investment. The president's tariff policy has been so chaotic that it has some wondering whether he's trying to wreck the economy on purpose.
"If we don't get clarity by the back half of this year, economic uncertainty can be like a deer in the headlights," Nancy Lazar, chief global economist at the investment bank Piper Sandler, toldThe New York Times on Friday. "Things just stop. Business confidence is muted, employment is muted, and capital spending is put on hold."
Richard Trent, executive director of the Main Street Alliance, said in a statement Friday that "small business owners don't need more chaos."
"In the past month alone, market turmoil has frozen hiring, disrupted key programs, and rattled confidence," said Trent. "There's still time to correct this, but that requires President Trump and Elon Musk to work with Congress, follow the law, and restore stability. Main Street needs steady leadership, not chaos and cutbacks."
In a column earlier this week,The American Prospect's Robert Kuttner wrote that less than two months into his second term, "Donald Trump is on track to be the first president to deliberately engineer a severe depression."
"Trump has the power to issue commands in the domains that he controls, but he can't command the stock market to levitate, or prices to moderate, or consumers to feel confident, or people who have just been laid off to go out and shop," Kuttner wrote. "In a couple of weeks, the budget talks will reach the point of an increasingly likely government shutdown. Closing the government will be even more of a hit to total demand and consumer and investor confidence."
"In agreeing to reopen the government, Democrats are in a good position to demand that Trump reopen the whole government, starting with the parts that Musk has illegally shut down," he added. "In the meantime, this engineered crisis is entirely Trump's."
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'Wowza': Economy Added 254,000 Jobs Under Biden-Harris in September
"This labor market," said one economist, "is the result of policy choices that prioritized full employment—as it turns out putting people first, works."
Oct 04, 2024
Friday's job report from the Bureau of Labor Statistics offered a "better than expected" picture of job growth as federal unemployment hit 4.1% and more than a quarter-million people were added to the payroll last month alone.
In what ABC Newsnoted was "one of the last major pieces of economic data before the presidential election," the jobs report offered an indication of economic strength—a possible boon to outgoing President Joe Biden's legacy and a political advantage to Democratic presidential nominee Vice President Kamala Harris ahead of November 5.
"U.S. hiring surged in September," the news outlet reported, "blowing past economist expectations and rebuking concern about weakness in the labor market."
Former Labor Secretary Robert Reich responded to the new data Friday morning by pointing out that "more jobs have been created during the Biden-Harris presidency than during any single presidential term in history."
Donald Trump "doesn't often tell the truth, but he was right about this," added Reich, who quoted the GOP presidential candidate in 2004 admitting that "the economy does better under the Democrats than the Republicans."
More jobs have been created during the Biden-Harris presidency than during any single presidential term in history.
Trump doesn't often tell the truth, but he was right about this:
"The economy does better under the Democrats than the Republicans." — Donald Trump in 2004 pic.twitter.com/32XQnqbbb1
— Robert Reich (@RBReich) October 4, 2024
"Wowza," said economist Justin Wolfers, a professor at the University of Michigan and a senior fellow at the Brookings Institute, in response to Friday's report.
Mentioning how payrolls grew by over 254,000 in September—"well above expectations"—and that large upward revisions were made to the August and July payroll numbers, Wolfers said the overall picture shows an "economic expansion that is motoring along."
September jobs report: US economy adds 254,000 jobs vs. 150,000 expected pic.twitter.com/fUZvzx8tuK
— Yahoo Finance (@YahooFinance) October 4, 2024
"It was 'wow' across the board, much stronger than expected," Kathy Jones, chief fixed income strategist at Charles Schwab, toldCNBC. "The bottom line is it was a very good report. You get upward revisions and it tells you the job market continues to be healthy, and that means the economy is healthy."
Pointing to a recent analysis by her colleague Josh Bevins, Economic Policy Institute (EPI) economist Hilary Wething on Friday credited the strong performance represented by the new jobs numbers as the result of specific policies by the administration.
"You might think we just magically stumbled upon a consistently strong labor market—but no, this labor market is the result of policy choices that prioritized full employment—as it turns out putting people first, works," said Wething.
Elise Gould, a senior economist at EPI, also championed the "strong" figures:
In a blog post on Thursday, ahead of Friday's report—Gould detailed the strength of the labor market, despite the real pain that many workers and families still feel in their day to day lives:
It is indisputable that the U.S. labor market is strong. The share of the population ages 25–54 with a job is at a 23-year high, median household incomes rose 4.0% last year, and real wage growth over the last four years has been broad-based and strong. The economy has not only regained the nearly 22 million jobs lost in the pandemic recession, but also added another 6.5 million.
Are some folks still having a hard time? Absolutely. Even when the unemployment rate is low, there are still sidelined workers, and it remains difficult for many families to make ends meet on wages that are still too low. Unfortunately, that's a long-term phenomenon stemming from a too-stingy U.S. welfare state, rising inequality, and the legacy of anemic wage growth during past economic recoveries. But when comparing the labor market with four years ago (during the pandemic recession) or even before the pandemic began, the answer is clear: More workers have jobs and wages are beating inflation by solid margins.
With the Federal Reserve easing interest rates, in part based based on the strength of the hiring trends alongside lower inflation, Friday's jobs report was welcomed as a show of strength for progressives who have argued since the Covid-19 pandemic that pro-worker policies—as opposed to endless fealty to the demands of corporate powers and Wall Street—alongside public investments can work together to create strong economic foundations for the nation.
"Today's strong jobs report confirms once again that we never had to throw millions of people out of work to tame inflation," said Kitty Richards, a senior fellow with the left-leaning Groundwork Collaborative.
"Thanks to big investments in [pandemic] relief, manufacturing, and green energy, inflation is low, and the economy is still delivering for workers," Richards said. "The pundits who said we couldn't have low unemployment, growing wages, and stable prices at the same time have been proven wrong."
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