With legislation in both the Iowa House and Senate, ending tax on tips is set as a priority for state legislators, following a federal campaign promise from President Donald Trump.
The end of income taxes on tipped income would impact a number of University of Iowa students, many of whom work service jobs to pay for school.
UI second-year student Matt Leisten has worked three service jobs, including at Vue Rooftop and The Java House in Iowa City.
Leisten said the majority of his paycheck consisted of tip money when working at Vue Rooftop, but the money was not much.
“When I was at Vue [Rooftop], it was definitely annoying, because I would get a 5 percent tip out, and then that tip out was taxed as well,” he said. “So, I wasn’t getting that much in terms of tips.”
Leisten said removing the tax from tips would definitely be beneficial for him.
“Making some more money is always helpful, especially as a college student,” Leisten said.
Ending tax on tips has bipartisan support from Iowa lawmakers, with nearly identical proposals from both parties.
Iowa Rep. Bobby Kaufmann, R-Wilton, chair of the Ways and Means Committee, said he felt it was imperative to push for this legislation because of its bipartisan support.
“It’s one of those rare things, in my opinion, where Democrats, Republicans, President, Congress, the state — it’s one of those rare issues that all of us agree,” he said.
House File 268, introduced and led by Kaufmann, advanced through the House Ways and Means Committee unanimously on April 16.
Iowa Rep. David Jacoby, D-Coralville, introduced the Democrats’ proposal House File 293, which has not advanced. He said legislation removing taxes from tips has been a long time coming.
“We think it’s just about time that we give a tax break to the hardest working people, especially in the service industry,” he said.
Kaufmann said the Democrats’ proposal, introduced only four days after Republican’s House File 268, is the party’s way of showing their support for the Republican-introduced legislation.
“I say this in jest … I think that it is simply the Democrats reaffirming better support for something that I have also affirmed support for,” Kaufmann said.
Jacoby was less adamant that both parties were equally as motivated to pass the legislation.
“The main difference, and I’ll be real blunt about it, is that we really mean it, that we’re fighting for servers,” Jacoby said.
He said when Democrats have previously proposed amendments to bills removing tax on tips, Republicans have voted against it. Jacoby called the Republicans’ proposal a “political ploy.”
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“I think what they’re doing is trying to get a headline for elections, but they’re not really going to get it done,” he said.
Both Jacoby and Kaufmann said they saw few downsides to removing tax on tips.
Kaufmann said money lost from the state budget from the proposal is worth keeping the extra cash in Iowan’s pockets.
“The hit to the state is far outweighed by the positive consequences of those dollars staying in those individuals’ pockets,” Kaufmann said.
Jacoby said he doesn’t think the change will affect state tax revenues if employers implement a true minimum wage and pay taxes on it. He does think the change would cause a shift in service workers wanting to go to places where they can earn the highest tips.
“I think it would increase the competition in the service industry,” Jacoby said.
Jacoby said while no tax on tips is a campaign promise from the Trump administration, he feels more closely tied to the issue.
“Both my daughters worked in the service industry to get through high school and college,” he said. “I’m pretty sure Trump’s kids didn’t work anywhere.”