California Republicans proposed a plan to eliminate taxes on tips, following former President Donald Trump’s call for the same measure.
Vice President Kamala Harris, a former California senator, supported the idea as well.
However, the proposal was rejected by California Democrats, who voted it down in the state Senate.
The California Senate Republican Caucus expressed their frustration in a statement, saying,
“Even Trump and Harris both say we should eliminate the ‘tip tax.’”
This proposal aimed to provide financial relief to workers in tipped professions, many of whom rely heavily on tips to make ends meet, as they often earn less than the minimum wage.
The proposal gained traction after Trump announced the idea during a rally in Nevada, a state with the highest percentage of tipped workers.
Harris followed suit, also signaling her support for the plan.
According to the Budget Lab at Yale University, the United States has approximately 4 million tipped workers, representing 2.5% of the entire workforce.
The majority of these workers, including servers and barbers, would see a significant benefit from eliminating taxes on tips.
However, despite bipartisan backing at the national level, the proposed amendment faced stiff opposition in California.
The state Senate Democrats, except for Senate President Pro Tempore Senator Mike McGuire, D-Healdsburg, and State Senator Nancy Skinner, D-Berkeley, who abstained, voted to table the amendment.
All nine Republican Senators voted in favor of the tax exemption.
One of the primary concerns expressed by California Democrats is the potential revenue loss.
The bipartisan Committee for Responsible Federal Budget estimates that such a proposal could reduce federal revenue by $15 to $25 billion annually.
In California, the state recently closed a $47 billion budget shortfall, using a combination of cuts, deferrals, and financial shifts. Implementing the tax exemption would likely exacerbate this issue, leaving lawmakers unsure how to fill the potential gap in state revenue.
The debate over eliminating taxes on tips highlights a clear divide between California Republicans and Democrats.