Progressive cities are scrapping the tipped-wage credit, shifting workers from tax-free tips to taxable wages, and likely leading to lower take-home pay.
What began as a campaign promise in Nevada became law this summer with the passage of the One Big Beautiful Bill Act: "No taxes on tips" is now nationwide. But even as pundits debate its merits, progressive cities are quietly undoing the tax cut—and few are noticing.
Progressive cities such as Washington, D.C., and Chicago have recently eliminated the tipped-wage credit, which lets employers pay tipped employees below minimum wage as long as tips filled the gap. Now, New York City is the next battleground in a push to mandate a one-size-fits-all minimum wage.
The campaign against the tipped-wage credit began before then-candidate Donald Trump floated "no taxes on tips," but few have considered how these ideas play out together. To see the consequences, look at what happened when D.C. scrapped the tipped-wage credit.
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C. Jarrett Dieterle is a legal policy fellow for the Manhattan Institute.
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