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No Tax on Tips

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Donald Trump addresses a military gathering

Donald Trump is a master showman and marketer. He demonstrated those skills once again with his proposal to kill the tax on tips. It’s more than shrewd. It’s brilliant.

Trump should kill the tax on tips – it’s good economic policy

After the hoorays from waiters and other service workers died down, political analysts weighed in. Their conclusion: this is a very smart way to gain an edge in Nevada, where the presidential race is close. That’s certainly true. But Trump’s proposal is much smarter and will have a bigger impact, not because of its impact on tips, as such, but because of the larger signal it sends. That signal says to lower-income workers across the country, “I understand your struggles, and I’m with you.”

Trump’s proposal says that loud and clear. It is both a blow to the IRS (who doesn’t like that?) and a tangible demonstration of how the former president connects to everyday working people. That’s a much broader cohort than the folks who rely on tips.

President Biden has emphasized his own connection to working people. He does it every time he calls himself “Scranton Joe,” and says he was raised by every group in town except the Hmong and Aboriginal Australians. (Those groups surely would be included if they had enough voters in swing states.)

Presidents must understand the working class

This contest for the allegiance of the working class is central to American politics and has been since the days of Andrew Jackson. They have been central to the Democratic Party’s coalition since Franklin Roosevelt’s reelection in 1936. FDR solidified the party’s coalition. Every successful Democrat on the national level since then has counted on the working-class vote – and the ones who didn’t (most notably Adlai Stevenson in 1956 and George McGovern in 1972) lost in landslides.

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Ronald Reagan, who’d been a New Deal Democrat as a young man mounted a frontal assault against the FDR alliance and launched a long-term shift in the process. Donald Trump has gone further. He has captured that constituency among whites, competes for them among Hispanics, and is eroding it, at least slightly, among black men. That shift in all three groups could have a huge impact in the swing states of Pennsylvania, Michigan, Wisconsin, Minnesota, Nevada, and Arizona. This year’s election may well hinge on them, and even slight changes could alter the outcome.

Trump’s challenge to the heart of the old Democratic coalition is part of a larger realignment in American voting patterns. That realignment is obvious in the wealthy suburbs, which have gradually switched from moderate Republican to moderate Democrat. The wedge issue there is the Republican Party’s social conservatism, which alienates more than it resonates in those areas.

A week economy cancels all bets

The suburbs are up for grabs this year because of weak economic performance, persistent problems with public schools (which are linked to Democrats because of the party’s bond with teachers’ unions), and the Democratic Party’s move much further left. No matter how the suburbs vote this year, though, their longer-term shift is clear.

An equally clear shift in the opposite direction is happening in working-class neighborhoods. Chicagoans call them the “bungalow belt.” They were once occupied by immigrants from Eastern Europe. They are now the home of second- and third-generation Mexican Americans, Puerto Ricans, and pilgrims from Central America. Trump is emerging as an unlikely champion of that constituency. He knows they don’t want ideological indoctrination in public schools or control by teachers’ unions instead of parents. They want cheaper energy a lot more than they want electric vehicles, which are too expensive. And they damn sure don’t want some bureaucrat in Bethesda telling them they can’t cook on a gas stove. They recoil at the idea of non-elected officials pushing that agenda down their throats.

Their resistance is part of a broader, more populist movement. It’s much different from the traditional constituency behind the Republican push for lower taxes and less regulation. That old constituency is no longer in the control of the party. Trump’s leadership makes that clear.

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Tune-deaf Democrats don’t get how the no tax on tips message will play

It doesn’t seem to be clear to Democratic campaign consultants, though. They are saying what they always have: “Republicans are just out to help the rich.” It’s not working this year. Why not? Because Donald J. Trump is not George H. W. Bush, and Trump’s party is not Bush’s. Try as they might, Democrats cannot convince voters that Trump is Richie Rich, that he looks down on them, or wants to line his friends’ pockets at their expense. Democrats can’t make those labels stick to today’s Republican Party, either. It has become a populist, working-class party – and voters can see it.

Democrats respond that Trump is a billionaire. He is, of course, but that label hasn’t damaged him for a couple of reasons. The first is his personality. He effectively presents himself as an ordinary guy who connects easily with ordinary people. He knows how to entertain them and demonstrates it every time he walks on stage. Second, he didn’t make his money as a banker, stock trader, or middleman. He did something tangible working people can relate to: he built buildings. They may have been high-income residences and golf clubs, but those are Trump’s consumers, not Trump himself.

Write it on the bill

It is simply impossible to label the former president as a country club Republican who looks down on the peasantry. Voters certainly don’t think see him that way. A lot of them think, “Hey, he’s doing just what I’d do if I had his money. I’d fly in my own plane, put my name on it, and eat as many Big Macs as I want. And I would tip the poor guy or gal who works behind the counter. What a lousy job.”

That brings us to the cherry on top of Trump’s “no tax on tips” idea. He’s telling people to write that message on their bills when they pay them. That’s another ingenious ploy. It directly engages consumers (who are voters, of course) and lets them demonstrate their support for both service workers and Trump. Who doesn’t want to put in a kind word for the people serving them? Trump has not only made that easy to do, he’s made it clear that doing so puts the consumer on his side. They don’t have to wear a MAGA hat to do it.

It’s a small ball in a bigger game. But it will matter if the election is close. And it demonstrates, once again, why Trump’s intuitive grasp of marketing and glad-hand showmanship give him a huge advantage. His challenge now is to stay disciplined, and not shoot himself in the tip.

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This article was originally published by RealClearPolitics and made available via RealClearWire.

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Peter B. Ritzma Professor Emeritus at | charles.lipson@gmail.com | Website | + posts

Dr. Charles Lipson taught international relations at the University of Chicago, where he was the Peter B. Ritzma Professor in Political Science and the College. His research deals with international cooperation and conflict and with political aspects of the world economy. His most recent book on international relations, Reliable Partners: How Democracies Have Made a Separate Peace, explains one of the most striking features in world politics: why democracies do not fight wars against each other. (Princeton University Press, 2003). Dr. Lipson has also written extensively on international trade, debt, and investment. His book, Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries, has been widely praised for combining politics and economics. It is concerned with the problems faced by successful corporations when they operate in difficult political environments around the world.

Professor Lipson's most recent work deals with the problems of forging international cooperation after the Cold War. He is currently writing about the sources of international order in the nineteenth and twentieth centuries.

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