One simple move could make Colorado a better place for customers and employees of restaurants, hotels, golf courses, resorts and other service businesses.

Stop taxing tips.

Former President Donald Trump, if elected to a second term, wants the IRS to stop taxing tips earned by service-sector employees. While this might or might not occur, Colorado Gov. Jared Polis and the Legislature should take up the cause.

Polis wants to eliminate state income taxes, and this would be a good start.

In Colorado, tipping contributes revenue essential to keeping service-oriented businesses afloat. Colorado’s minimum wage is $14.42, except for tipped employees who earn $11.40 after employers subtract an hourly $3.02 “tip credit.”

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Ask managers in Colorado’s service-sector about challenges, and they’ll rank hiring and retaining employees among the highest.

Simply paying more to employees isn’t a good option, as each wage increase obstructs middle- and lower-income people from enjoying what service industries offer. The higher a waiter costs, the higher goes the price of a meal.

“It’s a great idea. Eliminating income taxes on tips would make service industries more attractive to potential employees,” said Jack Damioli, president and CEO of The Broadmoor and associated properties in and around Colorado Springs.

Damioli (whose company is owned by Gazette parent Company The Anschutz Corporation) said eliminating taxes on tips could encourage companies to expand and hire more and better-trained employees.

It would promote better tipping, as customers are more likely to give if the government doesn’t take a chunk. That means fewer hard-working adults struggling to provide for their households.

It could be a win-win, even for state government. More service industries with higher capacity would generate more sales taxes, licensing fees and other costs governments impose on businesses. It would reduce dependence on the state by allowing employees to keep more of what they earn.

A tip is a gift, which means it should not be taxed. The federal government does not tax gifts below $18,000 and should not tax them at all. Money given from one person to another has been taxed, and governments should not double tax cash given freely by a satisfied customer.

This could and should be a bipartisan effort to help some of the hardest working, lowest-paid workers in our state. If properly explained, the public should be eager to support the tax break.

This was attempted during the pandemic, when state Republicans ran House Bill 20B-1020, which failed along partisan lines. It would have allowed service workers to deduct tips when calculating income taxable by Colorado.

The political climate has changed since 2020, as shown by support for Trump — even in some of the country’s most Democratic states. That’s because inflation since the pandemic has devoured the take-home pay of middle- and lower-income Americans. People are desperate for economic relief and will blame whichever party refuses to deliver.

Post-pandemic, Colorado government has no shortage of cash. In 2024, the state has seen a $2.4 billion increase in revenues because of soaring housing valuations and the elimination of the Gallagher Amendment. With annual surpluses in the billions, the state can stop taxing tips without gutting programs and services.

Before the next session, legislators should devise and pitch a plan to exempt tips from taxation. It is a clear path to making Colorado a better place to work, live and have fun.

Colorado Springs Gazette Editorial Board