At President Trump’s direction, Congress is considering proposals to exempt tips from taxable income. After Trump floated this gimmick on the campaign trail, Republican and Democratic elected officials alike have embraced the idea. The House Republican budget bill (H.R. 1) includes a “no tax on tips” provision that gives the illusion of helping lower-income workers—while the rest of the legislation hands huge giveaways to the rich at the expense of the working class. The Senate recently passed a standalone version of no tax on tips that similarly provides the false impression of aiding workers while giving employers excuses to incentivize tipped work and keep base wages low.

If the Trump administration and its allies in Congress genuinely wanted to help tipped and lower-paid workers, there are far better options they could pursue, like raising the federal minimum wage. To illustrate this, we compare the estimated impact of no tax on tips with the Raise the Wage Act of 2025, a bill that would raise the federal minimum wage from $7.25 to $17 an hour by 2030 and gradually phase out the tipped minimum wage. Here is an overview of how the two plans compare.

How many workers would be affected? How long would benefits last?

No tax on tips: Between 2.5 and 5.2 million tipped workers would receive an income tax deduction over the next four years, but benefits would end after 2028.1

The Raise the Wage Act: Nearly 23 million workers, including 2.8 million tipped workers, would earn higher wages with no end date—meaning affected workers would continue to benefit indefinitely.

How much would these workers benefit annually? How would benefits differ based on income?

No tax on tips: Eligible tipped workers would receive an average annual tax cut of $1,700 for the four years it would be in effect. However, the benefits would heavily skew toward higher-income tipped workers. Among all tipped workers, the top 20% would receive an average tax cut of $5,768 while those in the bottom 20% would only get $74 on average. The average for the bottom quintile is small in large part because two-thirds of those workers have incomes so low that they do not pay federal income taxes and thus will not see any tax benefit.2

The Raise the Wage Act: Affected workers who work year-round would receive an average wage increase of $3,200 per year. After taxes, the net pay increase would be marginally smaller but still significantly larger than what a worker would receive on average with a tax deduction on tips.3 In stark contrast to “no tax on tips,” which excludes workers with the lowest incomes, the largest benefits of the Raise the Wage Act would go to the lowest-paid workers.

Who pays for these benefits?

No tax on tips: The public writ large would pay. House Republican lawmakers are already proposing massive cuts to social programs, such as Medicaid and food stamps that benefit millions of people (including tipped workers), to offset foregone revenue from no tax on tips and large tax cuts for the rich. The Republican plan would also dramatically increase the federal debt, which could substantially raise borrowing costs for households and businesses in the future.

The Raise the Wage Act: Employers of low-wage workers would pay for these wage increases, absorbing the higher labor costs over time through a variety of channels. Importantly, the Raise the Wage Act not only increases the federal minimum wage but also phases out the tipped minimum wage, a system that has provided employers of tipped workers an enormous—and highly problematic—public subsidy for decades.

While no tax on tips would benefit only the small share of workers who receive tips as a portion of their compensation, the Raise the Wage Act would benefit all low-wage workers in the U.S., including 4.2 million people with incomes below the poverty line. Over the next 10 years, the Raise the Wage Act would have a total benefit to affected workers of $700 billion, compared with about $39 billion from “no tax on tips” in the House bill (see Figure A).

Figure A

As we at EPI and others have noted, no tax on tips is problematic for a variety of other reasons, aside from its paltry and poorly targeted benefits. The measure that passed in the House caps eligibility to workers in certain tipped occupations earning less than $160,000 in annual income. This will mitigate tax avoidance by the highest earners, but it does not fix other problems, including the fact that ending taxation of tips would likely expand employer use of tipped work—a system already rife with discrimination and worker abuse. No tax on tips would also undercut efforts to raise worker compensation while depleting tax revenue for public services. By subsidizing the use of tipping in the federal tax code, no tax on tips would further cement a system that lets employers off the hook from paying their workers a fair wage—in this case, forcing taxpayers to foot the bill. In contrast, the Raise the Wage Act gives workers a durable wage increase paid for by those who should be paying—their employers.

Beyond raising the minimum wage, there are several other effective and more equitable policies to support working families—including expanding the Earned Income Tax Credit and Child Tax Credit, providing workers with paid sick leave and paid family and medical leave, and supporting workers’ rights to form and join unions. But Trump and congressional Republicans, while claiming to support workers, have not pursued these policies. Instead, they have relentlessly attacked workers, and pushed an enormous tax cut for the wealthy—paid for by cutting essential social programs for low-income people and children and adding trillions to the public debt. As many as 16 million people would lose their health insurance under the House budget bill.

The Raise the Wage Act is by no means an outlier or a radical exercise in messaging—it’s cosponsored by majorities of House and Senate Democrats. If even a few Republicans were willing to support it, it could easily have the votes to pass. No tax on tips, on the other hand, remains a deceptive ploy that would provide few benefits to workers and fail to offset the harm the Republican budget bill would impose on millions of workers and families.

1. According to Yale Budget Lab’s estimates, about 6.3 million tax units claim tipped income, though only about 4 million workers work in tipped occupations. Since 37% of workers in tipped occupations earn so little that they do not pay federal income taxes and thus would not benefit from the plan, the lower bound of this estimate is 2,520,000 (0.63 times 4 million). The upper bound takes the average share of tax units with a tax cut by quintile (Yale Budget Lab Figure 5) and multiplies it by the total number of tax units with tipped income (83.3% of 6.3 million is 5.2 million).

2. See Yale Budget Lab “No Tax on Tips”: Budgetary, Distributional, and Tax Avoidance Considerations, Figures 5 and 6. 1st quintile is 0.336*220=$74. 5th quintile is 0.991*5820=$5,768.

3. For example, the marginal federal income tax rate on all taxable income between $11,600 and $47,150 is 12%. For the average tipped worker, assuming they use the standard deduction and have no other sources of income, their total taxable income likely falls in this range. Thus, a $3,200 increase in wages—without accounting for any tax credits— would net a roughly $2,800 increase in annual post-tax income, $1,100 more than the average net income increase under no tax on tips.

What is happening?

The Trump administration is taking a reckless approach to deregulation. In his first day in office, Trump ordered a regulatory freeze, barring departments and agencies from issuing any new regulations and pushing back pending regulations until they could be reviewed by a Trump administration appointee. The administration has issued several additional deregulatory orders, including rescission of Biden administration actions that sought to modernize the regulatory process.

These deregulatory executive orders include, among several others:

• EO 14148: Initial Rescissions of Harmful Executive Orders and Actions
• EO 14192: Unleashing Prosperity Through Deregulation
• EO 14219: Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative
• EO 14294: Fighting Overcriminalization in Federal Regulations

EO 14129’s directive to cut 10 regulations for every new regulation added signals a disdain for regulation as a concept, rather than an appreciation for government efficiency.

Trump is also changing how several institutions responsible for developing and enforcing regulations function, either by reinterpreting their purpose to be deregulatory (as in the cases of the Occupational Safety and Health Administration [OSHA], Food and Drug Administration [FDA], and Environmental Protection Agency [EPA]), or hobbling the effectiveness of entities like the National Labor Relations Board, Equal Employment Opportunity Commission, and Consumer Financial Protection Bureau). This uncritical hostility toward regulation removes guidelines and guardrails that keep U.S. workers and their families safe. The economy is more vulnerable to downturns and public health crises without the protections provided by health and safety regulations.

Why is this happening?

The Trump administration has made its economic policy priorities clear: cut taxes for the rich, make it cheaper to do business, and reduce the scope of government and corporate accountability to workers and their families, especially to poor communities and communities of color. Health and safety regulations prevent employers from engaging in cost-cutting behavior at the expense of workers and communities. Reckless deregulation serves the purpose of reducing costs for employers—even when those regulations protect workers and their families—because regulatory compliance can be costly.

Regulation ensures that workers and their families are shielded from the harms stemming from unrestricted market activity. Policymakers regulate in the wake of crises and tragedies to protect future generations and ensure history does not repeat itself. The Trump administration deregulates recklessly because it dismisses history and does not care about the consequences of bad policy for queer communities, communities of color, or the non-rich, so long as the cost of doing business falls. Inadequate regulation creates the conditions for abuse—and when vulnerability and opportunity for abuse meet, we inevitably see harm. 

Why does that matter for public health and worker safety?

Responsible regulations impose costs on harmful business practices, without which there would be little incentive for employers to prioritize worker and public safety over profit. The FDA requiring milk to meet quality standards before it can be sold in stores imposes a cost on dairy farmers, who must operate their farms adhering to safety standards that result in a higher quality product. Reducing FDA staff such that milk quality testing is no longer feasible reduces the scope for regulatory compliance and corporate accountability to consumers, and raises the possibility of exposure to pathogens including bird flu.

OSHA and EPA regulations ensure that employers will be held accountable when they expose workers and their communities to harmful substances. These regulations require coal mines to protect workers from exposure to black lung disease by providing protective equipment and ensuring their operations are minimally damaging to the surrounding community’s water sources through wastewater management. Removing these health and safety regulations and dismantling the institutions that enforce them certainly makes it cheaper to operate the coal mine, but only through imposing a larger public health cost on miners and their communities. Reckless deregulation may save corporations money and “cut government spending” but delivers the opposite of efficiency.

Why does that matter for racial health disparities?

Black and brown workers and their communities will face the worst consequences of Trump’s reckless deregulatory crusade. Their historical lack of access to wealth and political power means that, without the protections that health and safety regulations provide, they remain vulnerable to irresponsible business practices and policy.1 Laws and regulations prohibiting discrimination in health care and allowing lawsuits based on disparate impact are critical in the battle to close racial health gaps; the Trump administration is dismantling this legal framework through executive orders, setting back that effort toward equity.

Occupational segregation means that minoritized workers are also more likely to be employed doing dangerous work with higher fatality rates and for which health and safety regulations can save lives. In 2023, Black and Hispanic workers died on the job at rates of 3.6 and 4.4 per 100,000 workers, respectively—higher than the rate for workers overall (3.5 per 100,000 workers), and considerably higher than the rates for White and Asian workers (3.2 and 1.6 per 100,000 workers).

Black and Hispanic workers are more likely to die due to heat-related illness on the job compared with white workers, for example. The Trump administration’s regulatory freeze puts a pause on OSHA’s proposed rulemaking on “Heat Injury and Illness Prevention in Outdoor and Indoor Work Settings,” meaning that there are still no federal heat standards for workers. This rule would have required OSHA-compliant employers to develop and evaluate plans to protect workers from heat-related injuries and illnesses.

Losing environmental protections means exposing Black and brown communities to pollution, and further removing means to hold corporations accountable for the pollution they cause. Black and brown communities are disproportionately exposed to toxic waste; when given the funds to properly collect data and enforce policy, institutions like EPA provide the necessary regulatory framework for moving toward environmental justice and ultimately addressing the health disparities that arise from environmental racism. In the face of clearly visible racial inequities, the lack of rules and regulations to address those inequities essentially maintains structural racism.

What will it mean economically for workers and their families?

Reckless deregulation benefits employers and the wealthy at the cost of exposing the rest of the economy to greater risk and inefficiency. Short-term profits and cost savings from deregulation have historically set the stage for devastating economic consequences for workers and their families. Profit-seeking deregulation in banking set the stage for the 2008 financial crisis that tanked the world economy. Predatory payday lenders, exorbitant credit card late fees, and discrimination in lending all represent significant costs to U.S. households.

The greater health risks that come with removing health and safety regulations will cost workers and their families economically. While the Trump administration is removing COVID-19 vaccine mandates from schools, new, more contagious strains of the disease are appearing across the United States. The COVID-19 pandemic is estimated to have cost the United States $14 trillion due to reduced economic output and worsened health and premature death. Ironically, one area where the Trump FDA is pursuing more stringent regulation is in vaccine access. Using the regulatory system to pursue ideological crusades is dangerous and inefficient.

What can we do about it?

The Trump administration is engaged in a reckless crusade against health and safety regulations that will worsen our public health, cost us economically, and ultimately make the country more vulnerable to the next economic downturn and public health crisis. This is happening because the administration is more concerned with providing tax breaks for the wealthy and allowing corporations to irresponsibly cut costs than with protecting U.S. workers and their families. The consequences of this deregulatory crusade will fall heaviest on Black, brown, and poor workers and communities, because they are most in need of the protections that health and safety regulations provide. But make no mistake: The entire economy will suffer in the event of a recession or pandemic brought on by our collective exposure to more risk.

We need a responsible approach to regulation that takes seriously the need for guidelines and guardrails around doing business and implementing policy. A responsible regulatory framework would center equity-enhancing regulations and support the institutions charged with enforcing those regulations. The Trump administration is targeting and dismantling those very institutions. Protecting workers and their families means repairing our damaged regulatory system, being protective of existing responsible health and safety regulations, and being proactive about establishing new regulations where necessary to safeguard against future crises. Trump’s irrational hostility towards regulation benefits the few at the cost of putting us all at greater risk.

1. The subprime mortgage crisis is clear example of this; in the lead-up to the 2008 financial crisis, Black families were targeted with subprime mortgage loans even when they could afford conventional ones because 1) Black families did not have access to mortgages at the same rate as white families and so were eager to own a home when offered a chance (vulnerability), and 2) there were weak regulations on the kinds of mortgages that could be offered to prospective homebuyers and that could be bought and sold in financial markets (conditions for abuse).

In just a few months, the Trump administration has demonstrated its willingness to abandon workers and undermine their wages and working conditions. This includes repeated attacks to the Department of Labor (DOL)—the federal agency that oversees federal wage and hour laws, worker safety, workforce development, and employee benefits protection programs. Anti-worker nominations to key DOL positions—currently under Senate consideration—pose future risk to workers’ rights. 

In January, Trump rescinded Executive Order 11246, which enforced anti-discrimination protections and equal employment opportunity requirements in federal contracting—effectively halting the work of the Office of Federal Contract Compliance Programs. In March, Trump rescinded an executive order that raised the minimum wage for federal contractors, which could cut these workers’ wages anywhere from 25% to 60%. In early April, the Mine Safety and Health Administration—a DOL subagency—announced they were delaying the enforcement of the Biden-era silica rule for coal miners, increasing the risk of coal miners being exposed to silica dust.  

Most recently, Trump’s DOL asked to pause litigation on the Biden-era overtime pay rule, seemingly indicating that the department plans to rescind the rule that expanded the right to overtime pay for 4.3 million workers. DOL also announced it would stop enforcing a Biden-era rule that made it harder for employers to misclassify workers as independent contractors, potentially costing workers thousands of dollars each year.  

In addition to policy changes, Trump has put forward nominations that could impact workers’ rights. Trump nominated Jonathan Berry as the Solicitor of Labor, who is now awaiting his Senate confirmation hearing. Berry authored the Project 2025 section on the Department of Labor, which dangerously calls for weakening the federal minimum wage, limiting overtime eligibility, and repealing prevailing wage requirements for federally funded construction projects. If confirmed, Berry will be DOL’s chief legal officer with independent authority to initiate lawsuits enforcing federal labor laws. 

But that’s not all. Reports suggest that roughly 20% of DOL’s workforce has taken some form of retirement or buyout since Trump took office. This “voluntary” reduction in DOL staff will negatively impact the agency’s services, including enforcement of labor laws, funding of workforce development, and publication of credible labor market data. Trump continues to advance an anti-worker agenda by proposing a 35% cut to DOL’s budget in the administration’s fiscal year 2026 budget request. EPI will continue to monitor actions from the Trump administration, Congress, and the courts that impact workers at Federal Policy Watch.  

Below, EPI economists offer their insights on the jobs report released this morning, which showed 139,000 jobs added in May. 

From EPI senior economist, Elise Gould:

Read the full thread here.

The latest BLS data out this morning suggests the labor market remains relatively resilient compared to softer measures though the household survey shows some signs of weakness.
– payroll jobs up 139k
– federal jobs down 22k
– labor force participation down 625k
#EconSky #NumbersDay @epi.org

[image or embed]

— Elise Gould (@elisegould.bsky.social) Jun 6, 2025 at 7:47 AM

Payroll employment increased 139k in May, though there were notable downward revisions the past two months, a total of 95k fewer jobs in March and April than originally reported. Job growth was strong in health care and leisure and hospitality. The federal government lost 22k jobs in May.
#EconSky

[image or embed]

— Elise Gould (@elisegould.bsky.social) Jun 6, 2025 at 7:57 AM

Employment in the federal govt fell 22k in April, down 59k since Jan. Even as bad as this is, the devastation to the federal workforce has yet to be fully realized because many workers are on administration leave and more recent federal UI claims data suggest further cutbacks.
#EconSky #NumbersDay

[image or embed]

— Elise Gould (@elisegould.bsky.social) Jun 6, 2025 at 8:03 AM

From EPI president Heidi Shierholz:

Read the full thread here.

Another “tale of two surveys” for #JobsDay. The payroll survey was solid—139k jobs added—while the household survey showed a huge drop in employment, -696k. (The unemp rate didn’t rise because the drop in employment was masked by people dropping out of the labor force.) 1/

— Heidi Shierholz (@hshierholz.bsky.social) Jun 6, 2025 at 7:45 AM

Remember that when the surveys are telling different stories, the rule of thumb is to put more weight on what the payroll survey says, since it is a much bigger survey. 2/

— Heidi Shierholz (@hshierholz.bsky.social) Jun 6, 2025 at 7:53 AM

That said, the weak household survey could be giving us a glimpse of what the future holds, as the impact of Trump’s foolish, cruel, chaotic policies begin to have real effects on the economy. 3/

— Heidi Shierholz (@hshierholz.bsky.social) Jun 6, 2025 at 7:53 AM

It’s worth noting that while the payroll survey was indeed solid, it nevertheless slowed, and there were downward revisions to prior data. Last #JobsDay, the three-month moving average was 155k. Today, it was 135k, a sizeable drop. 4/

— Heidi Shierholz (@hshierholz.bsky.social) Jun 6, 2025 at 8:05 AM