Restaurant Industry Divided on Trump's Proposal to Tax-Free Tips

Strategic Insights -

As President Donald Trump's proposal to tax-free tips gains momentum, segments of the U.S. restaurant industry are speaking out against it, citing concerns that it would help too few people and obscure bigger issues in the way tipped workers are paid. The Independent Restaurant Coalition, which represents nearly 100,000 restaurants and bars, has appealed to Congress to reconsider the proposal, arguing that it leaves out many workers, including dishwashers and chefs, who are paid low wages. On the other hand, some workers who rely on tips, such as bartenders, say they oppose making them tax-deductible, arguing that it would lead to a decline in tipping and ultimately hurt their income.

Key Takeaways:

  • The Independent Restaurant Coalition represents nearly 100,000 restaurants and bars and has appealed to Congress to reconsider the tax-free tips proposal.
  • The proposal would benefit around 2 million servers and bartenders, according to the National Restaurant Association.
  • However, the U.S. restaurant industry has many workers, including dishwashers and chefs, who are paid low wages and are not included in the tax-free tips proposal.
  • Around 15% of U.S. restaurants add some form of service charge to customers' bills, according to the National Restaurant Association.
  • George Skandalos, a pizza restaurant owner in Moscow, Idaho, has implemented a gratuity-free policy at his restaurant, Maialina, where customers are charged a 20% service fee that is distributed to all employees.
  • Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union Local 226 in Las Vegas, wants Congress to take up a separate bill that would eliminate taxes on tips and raise the federal minimum wage to at least $15 per hour.

Statistics:

  • 2 million servers and bartenders would benefit from the tax-free tips proposal, according to the National Restaurant Association.
  • 15% of U.S. restaurants add some form of service charge to customers' bills, according to the National Restaurant Association.
  • The federal minimum wage is $7.25 per hour, and many tipped workers, including Yolanda Garcia, a barista at Resorts World in Las Vegas, make significantly less than this, with Garcia earning up to $33,000 per year, including up to $600 per month in tips.

Sources:

  • The Associated Press. 2025. "Restaurant industry divided over Trump's proposal to tax-free tips" (article)
  • The National Restaurant Association. "Tax-Free Tips: A Survey of the Industry" (report)
  • The Independent Restaurant Coalition. "Reconsider the Tax-Free Tips Proposal" (press release)