Donald Trump stated on August 23, 2024 in a speech in Las Vegas:
“Kamala cast the tiebreaking vote to hire 87,000 new IRS agents to go after your tip income.”
By Amy Sherman
Former President Donald Trump called Vice President Kamala Harris a "copycat" for showing support for a no-tax-on-tips plan.
Trump said Harris’ stance conflicts with her voting record.
Trump campaigned on eliminating tip taxes June 9 during a rally in Las Vegas. On Aug. 11, Harris also endorsed the concept at a Las Vegas. With more than 22% of Nevada’s workforce employed by the service and hospitality industry, the issue of taxes on tips is of high interest in this battleground state.
On Aug. 23 at a Las Vegas restaurant, Trump said: "Kamala cast the tiebreaking vote to hire 87,000 new IRS agents to go after your tip income."
Two days later, Trump unveiled an ad that said, "Harris and Biden have literally unleashed the IRS to harass workers who receive tips." The ad shows a fearful homeowner as workers in suits arrive to comb through her house.
In August, we debunked a similar viral statement on Instagram about Harris and tipped income. Harris cast the tiebreaking vote on the Inflation Reduction Act in August 2022, but the law did not lay out a plan to send 87,000 agents after tipped workers. And a 2023 IRS proposal to replace programs for taxed tip compliance was never implemented.
IRS planned to hire more workers, but not all in enforcement
The 2022 Inflation Reduction Act increased taxes on large corporations and gave an additional $80 billion to the Internal Revenue Service.
The claim that the IRS would hire 87,000 IRS agents came from a 2021 Department of Treasury report that said the IRS would use the $80 billion from the Inflation Reduction Act to hire 86,852 full-time employees by 2031.
But not all those jobs are for enforcement.
In 2023, the IRS used money from the Inflation Reduction Act to pay for 13,661 positions, including 495 for enforcement. From 2024 to 2030, the agency expects to hire about 32,500 more for enforcement. In total, for all jobs including enforcement, operations and taxpayer services, the IRS plans to hire about 53,000 employees from 2023 to 2030.
The agency has said it focuses enforcement against large corporations and wealthy taxpayers. The IRS said it had collected more than $1 billion from high-wealth taxpayers with past-due taxes since the law’s passage.
The Treasury Department previously said audits will not increase for households earning less than the $400,000 threshold. The median wage for waiters and waitresses is about $31,940, according to the Bureau of Labor Statistics — far below that threshold.
The Trump campaign pointed to a March 2022 CBS report that low-income households with less than $25,000 in annual earnings are more than five times as likely to be audited by the IRS as everyone else. The data came from an analysis by the Transactional Records Access Clearinghouse at Syracuse University that preceded President Joe Biden’s signing of the Inflation Reduction Act into law.
Susan Long, TRAC’s co-director and a professor of managerial statistics at Syracuse University, told us that the higher audit rates were driven by the "IRS targeting low income families claiming an earned income credit — not anything directly related to tip income per se."
IRS proposed a new tip reporting program to replace existing programs
In February 2023, the IRS proposed a new tip reporting program that would let service industry employers report tips voluntarily to help with tax compliance. The Service Industry Tip Compliance Agreement program aimed to use advancements in point-of-sale, time and attendance systems, and electronic payment settlement methods to improve tip reporting compliance.
The proposal was intended to replace three tip compliance agreements that have existed since 1993. The agency never adopted it.
"Treasury and the IRS have no plans to move forward with the voluntary program and, as such, there are no new reporting or compliance components," Treasury spokesperson Ashley Schapitl said. "We continue to carefully consider comments received in response to the proposed guidance."
Erica York, a senior economist and research director with Tax Foundation’s Center for Federal Tax Policy, said the Inflation Reduction Act did not change the tax treatment of tips.
"Tips have been reportable as income for decades and decades," York said in an email. She pointed to a form from 1966 that reminded taxpayers to include tips when reporting their income.
The Tax Equity and Fiscal Responsibility Act of 1982 "introduced more stringent rules for tip reporting in an effort to crack down on underreporting," York said. (But York added that that law wasn’t the start of taxing tips.)
The IRS established agreements in the late 1990s and early 2000s for industries such as restaurants and casinos to enhance tax compliance among tipped employees and their employers through taxpayer education, instead of auditing.
A 2018 Treasury Inspector General for Tax Administration study found that of the employers with tip reporting agreements that filed 2016 tax year forms, 30% had projected unreported tips totaling close to $1.66 billion.
The Trump campaign pointed to news articles and the Americans for Tax Reform report that took a dim view of the tips compliance proposal.
But York also told us, "The new program wouldn’t change what tipped workers owe on their income."
"My understanding is that the proposed program has been in development for a number of years, potentially dating back to this 2013 proposal from the IRS."
Trump said Harris "cast the tiebreaking vote to hire 87,000 new IRS agents to go after your tip income."
But his statement conflates and distorts two different policy proposals — one of which did not become reality — and misleadingly characterizes Harris’ position.
In 2022, Harris cast a tiebreaking vote to pass the Inflation Reduction Act, which included $80 billion for the IRS. Although the Treasury Department had previously said the money would be used to hire about 87,000 workers, that was not all for enforcement. And the law didn’t state the IRS would pursue tipped workers.
The agency is hiring enforcement workers, but fewer than Trump said. In 2023, there were 13,661 IRS workers who were funded through the Inflation Reduction Act including 495 for enforcement. From 2023 to 2030, the agency plans to hire about 32,500 for enforcement through the act.
In 2023, the IRS proposed a new program for service industry employers to report tips voluntarily to aid tax compliance. But the IRS has no plans to proceed with that proposal.
We rate his statement False.
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