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Tipped workers aren’t holding their breath for Trump and Harris’ proposals

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A craps table at a Las Vegas casino

David Becker/Photographer: David Becker/Getty

From the valets parking cars to the dealers at the blackjack tables to the bartenders at the city’s many bars, Las Vegas relies on people working for tips.

“Las Vegas was built on tips,” said James Reza, a city native who owns two high-end beauty salons in town.

Around 17% of workers in Nevada — the highest concentration in the country — make their living through tipped work, according to the Center for Business and Economic Research at the University of Nevada Las Vegas. Nationwide, tipped workers only account for about 2.5% of all workers, according to Yale’s Budget Lab.

To boost the incomes of these workers and win over voters in the crucial swing state where union power still holds weight, Vice President Kamala Harris and former President Donald Trump have both vowed to end taxes on tips.

Interviews with dozens of bartenders, rideshare drivers, servers, and small business owners in Las Vegas reveal the proposal, a centerpiece of national policy discussions, is certainly popular. Yet Nevadans are also clear-eyed about the candidates’ electoral intentions and befuddled by how this new system would actually work.

“I don’t know how much it would benefit them if it actually happens,” Reza said, referring to service workers.

Lawmakers of both parties, while quick to embrace the idea coming from the top of their presidential tickets, admit they haven’t nailed down exactly what taxes will be exempted from tips and who would still pay.

“For me, the devil will be in the details of all of this,” said Rep. Susie Lee, D-Nevada, whose district includes parts of Las Vegas.

Harris announced her intention to push for the tax benefit at a rally last week at the University of Nevada, Las Vegas. Meanwhile, after igniting the discussion with a “no tax on tips” promise in June, Trump is returning to Las Vegas Friday to reinforce his pitch to workers.

“It would be amazing” if tips became tax-exempt, said Daniel Cervantes, a bartender at CraftHaus Brewery in Las Vegas’ Arts District. “It would help me afford a better home, a place closer to work.”

Tax balancing act

President Joe Biden has signaled support for tax-free tips, as well as top congressional leaders, Senate Majority Leader Chuck Schumer, D-N.Y., and House Speaker Mike Johnson, R-Louisiana.

The challenge, though, is writing a law that balances offering maximum benefit for workers while also ensuring that it won’t become a tool for wealthy tax dodgers.

Republicans recently introduced legislation with support from some Nevada Democrats. Rep. Steven Horsford. D-Nevada, has said he’ll introduce his own bill soon.

Tips account for nearly 10% of underreported income that makes up the tax gap, the difference between taxes paid and taxes owed, according to a 2019 Treasury watchdog report. When it was last measured in 2006, tips represented $23 billion of the $235 billion in total underreported income, Treasury found. Cracking down on noncompliance among tipped workers is a challenge for the IRS, said Ric D. Hulshoff, a Las Vegas tax attorney who previously worked at the agency.

Lawmakers say they want income and industry limitations, a new definition of what a tip is, and other potential guardrails to prevent abuse by wealthy, non-tipped workers and employers.

Both Lee and her Republican challenger for the swing district, Drew Johnson, support an income cap and restricting the benefits to certain industries. Lee said she wants to ensure that “Wall Street hedge fund managers” can’t claim their bonuses as tips.

Keeping the benefits limited to the service industry is Johnson’s “biggest concern,” he said, adding that he would support proposals that also exempt tips from federal payroll taxes.

‘God bless the IRS’

Unions and workers say they’ve had a tense history with the IRS on tip reporting since agents in the 1980s came to casinos and sat behind blackjack tables checking how much dealers were taking home in tips.

Workers said it’s not unusual to go through an entire shift without many tips, particularly when serving tourists from cultures where generous gratuities aren’t the norm. Some workers still must pay tax on the tips the IRS expected them to receive, though, due to some agreements casinos have with the agency in which workers pay taxes based on tip averages.

Tipped employees may still face audits, too. The Legal Aid Center of Southern Nevada has partnered with local unions on a program that provides legal assistance for workers under audit.

Exempting tips from taxes might be a chance for a new relationship between the IRS and Nevada’s tipped employees.

“God bless the IRS,” quipped Leain Vashon, who’s been bell captain at the Paris Hotel for nearly 25 years, and is a member of the Culinary Workers Union Local 226. “I’m not looking to get rid of taxes totally. I just want to be able to have a fair tax for me and for everyone else who’s working.”

Local 226, which represents over 60,000 service workers in Las Vegas and Reno, Nevada, and holds strong sway in the state’s politics, has been instrumental in bringing the tax-free tips to the top of the Democratic agenda. The union’s Secretary-Treasurer Ted Pappageorge initially called Trump’s idea an “empty promise,” but was quick to mobilize with the Nevada delegation to endorse a bill from Sen. Ted Cruz, R-Texas, that would provide a 100% deduction for tipped wages, and introduce their own.

Pappageorge said the union also held conversations with Harris’ team ahead of her endorsement of the idea.

“We have relationships,” he said. “If there’s any discussion going on about gratuities and involves our members, we’re going to be in the conversation.”

Just a political move?

Despite building excitement around the tax-free tips proposals, Las Vegas workers and businesses remain skeptical.

“It’s definitely a double-edged sword,” said John Simmons, owner of the tapas restaurant Firefly off the Las Vegas Strip. “I want people to have a break, but then I also see that these politicians are using it in order to buy votes.”

Cervantes, the bartender, said it will ultimately come down to Congress to pass legislation codifying the proposal. Neither one of the candidates can act unilaterally if they take over the White House in 2025, he said.

While Pappageorge and lawmakers say they’ll make good on this promise, business owners and employees won’t count on any proposal until Congress makes serious moves.

Until there’s a law, “nobody will know who this helps and how much,” said P Moss, a Las Vegas and New York City restaurant owner.

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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