One year after then-presidential candidate Donald Trump pledged at a Las Vegas rally to end taxes on tips, the proposal became reality through the megabill passed by House Republicans, potentially affecting thousands of Nevadans who work in the state’s hospitality industry.

The policy, which quickly became a priority for Nevada’s congressional delegation after Trump introduced it last year, would allow tipped workers to deduct up to $25,000 in tips on next year’s tax returns. It’s estimated that more than 5 percent of Nevada workers are tipped — high relative to other states.

But the proposal is not permanent — as many proponents in the Silver State hoped it would be — and instead expires in three years.

It’s a divisive policy. Supporters argue it will be a boon for millions of employees nationwide amid a time of financial instability, while opponents are skeptical that it will significantly help the working class, as more than one-third of tipped workers already do not make enough to pay federal income taxes, according to the Yale Budget Lab.

Still, there are particular implications in Las Vegas, a region beset with layoffs and an uncertain economic outlook, in part because of Trump’s other policies, such as trade disputes with Canada that are slowing down tourism from America’s northern neighbor. Democratic state officials and the powerful Culinary Workers Union Local 226, which represents tens of thousands of workers in the hospitality industry, have cast significant doubt on the policy — especially in light of federal cuts to Medicaid and food stamps.  

“There will be fewer tips, fewer shifts and fewer jobs. The tip tax break won't mean much if there’s no one at the gaming tables or no one dining out,” Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) said during a bill hearing. 

Several analyses, such as from the Tax Policy Center, have found that the impact of the tax deductions would likely be more profound for higher-earning workers because of the way taxes are structured. On top of the standard deduction, “no taxes on tips” would create an additional deduction of up to $25,000 for tipped workers, but many of the lowest-earning workers won’t be able to qualify as they already have little to no taxable income.

Jeff Waddoups, an economist at UNLV, said in an interview that the policy should not be viewed as one that will particularly benefit the working class.

“It’s the fairly elite tipped workers that will benefit from this,” he said. “If you really want to help workers, what you do is you don't cut their Medicaid, what you do is you increase tax credits to make it easier for them to raise their kids … What you do if you wanna get elected is you come up with no tax on tips.”

We take a closer look below at the policy and what it means for the Silver State below. 

“We're going to have to pay a lot of attention”

At the center of the no taxes on tips policy in Nevada is the politically powerful Culinary Union, which represents tens of thousands of hospitality employees and has worked for years to ease tipped workers' tax burdens. After Trump pledged to end these taxes, the union said it was focused on fighting against “unfair taxation,” but called the proposal a “wild campaign promise.” 

Soon after, the union supported a congressional proposal to end the practice and, most recently, criticized the final bill for making the change temporary and including other provisions that will likely result in thousands of Nevadans losing their health care and food stamps. 

Culinary Union Secretary-Treasurer Ted Pappageorge told The Nevada Independent that although he supports the idea of “no taxes on tips,” the Trump administration’s execution is flawed.  

“The few things that were done for working class families are temporary, while the billionaires get their windfall tax credits permanent,” Pappageorge said in an interview. 

Pappageorge said the majority of Culinary workers will benefit from the $25,000 deduction, but the megabill, with its cuts to services such as health care, will likely end up hurting workers more than benefitting them. It's also notable that the tip exemption only applies to the federal income tax, meaning workers would still owe payroll taxes on their tips.

Meanwhile, the Treasury has to finalize the details of how the policy will play out — including what professions are eligible for the deduction. 

“We're going to have to pay a lot of attention to that,” Pappageorge said. 

Those concerns resonated with Culinary Union members. Sebastian Espinoza, a 31-year-old busser at Caesars Palace, said in an interview with The Indy that he believes the policy — especially the sunset clause and $25,000 cap — could have been better thought out.

“There could have been a bigger cap on it,” Espinoza said. “Tip culture is never promised. I could have a good day, I could have a bad day.” 

Espinoza also has back issues that have forced him to cut back on his work hours. Although he has health insurance through the Culinary Health Fund, he worries about what cuts to social services such as Medicaid could mean if he is ever laid off. 

“It's a game changer for us”

Concerns from progressives and the Culinary Union have been offset by some optimism from workers and the resort industry, which supports some 436,600 jobs — nearly a third of the state’s employment — according to the Nevada Resort Association.

Patrick Wrona, a food server at RPM Italian at Caesars Palace Las Vegas, said that he was “thankful” for the policy during a House Ways and Means Committee “field hearing” convened in Las Vegas by the panel’s Republican leaders to tout the “Big Beautiful Bill.”

“It's a game changer for us,” Wrona said. “This policy will let hardworking service professionals in Nevada like me keep more of what we earn. We are working-class people.” 

Other workers echoed Wrona’s sentiments. Steve Smagnola, a 35-year-old bartender at the Old Globe Saloon in Carson City, said that his initial reaction to the policy was positive. He said that about 25 percent of his income comes from tips. 

Although he called the threshold “weird,” he said he doesn’t think the policy will “hurt.” 

“The less taxes everyone pays, the better,” Smagnola said. 

Optimism from resorts industry

The casino industry, meanwhile, is hopeful that more discretionary income for tipped workers could translate into increased profits. 

“We don’t know what folks will do with that extra income,” Boyd Gaming CEO Keith Smith said during the company’s second-quarter earnings conference call on July 24. “They might save it, pay off bills or travel. All we know is they will be healthier from those changes.”

Boyd operates 29 resorts in 11 states, including 10 properties in the Las Vegas area, such as the Fremont Hotel & Casino. A spokesman said a “significant portion” of its workforce are tip earners. 

Wrona, who has worked two decades in the restaurant industry, said during the field hearing that the extra savings from the policy could help workers pay off mortgages, college tuition and everyday expenses. He also contended that the policy will benefit non-tipped workers with the potential for extra money from “no taxes on tips” to be funnelled back into local restaurants and venues. 

“We all spend it locally … that tip money isn't trivial,” he said.

Smith said Boyd and other casino operators will also benefit from a new tax deduction for seniors, age 65 and older, that will let them claim an additional deduction of $6,000. He said 40 percent of the company’s customer base falls into that age bracket. 

“That’s good news for us because we will clearly see some benefits from that group of customers,” Smith said. “We will benefit from that, both here in Nevada as well as across the country.”

Red Rock Resorts Chief Financial Officer Stephen Cootey, whose company operates seven casino-resorts and nearly two dozen small properties in Clark County, said during an earnings call that the company’s tipped workers could see between $300 and $1,800 in annual tax savings from the no taxes on tip legislation. 

Meanwhile, a company benefit analysis of the entire tax bill, including the elimination of federal tax on overtime pay, the new senior tax credit and expanded standard deductions, concluded it would greatly increase a consumer’s discretionary income. He said the company found that no taxes on tips would lead to an estimated $85 million in increased annual spending by consumers in Clark County. 

“Ultimately, the tax legislation can only be viewed as a good one for Las Vegas,” said Cootey.