One of the most innovative proposals in Donald Trump’s economic plan emerged from a conversation between the Republican presidential candidate and a waiter at a Nevada restaurant.

The waitress complained that tax collectors were “after her all the time with tips, tips, tips,” Trump told an enthusiastic crowd at the Republican National Convention in Milwaukee on Thursday night.

“I said, ‘Let me ask you a question, would you be happy if you didn’t have a tip tax?’ She said, ‘What a great idea,'” Trump continued. “No tip tax!” the crowd chanted back at the former president.

The idea, first floated in a campaign speech last month, has become a go-to slogan for Republican campaigners trying to win support from service-sector workers. Here’s a look at how it would work and who could benefit.

How would that work?

Eliminating federal taxes on tips would “significantly reduce the tax burden” for the 6 million tipped workers, including restaurant workers, baristas, taxi drivers, bartenders and hair stylists, said Andrew Lautz of the Bipartisan Policy Center.

In the U.S., tips can range from a dollar or two for a cup of coffee to a 15-20 percent tip (or more) for sit-down meals. Tipped workers reported earning an average of $6,000 in tips per person in 2018, the latest year for which data is available from the Internal Revenue Service.

Employees who receive $20 or more per month in tips must report them to their employers and tax authorities. These tips are subject to both federal payroll and income taxes under current tax law.

Only Congress could repeal one or both taxes. Trump has not provided details about what his plan would look like.

One bill from Republican lawmakers proposes to exempt tips only from federal income tax. Employers would still be required to withhold payroll taxes on them, and they would still be subject to all applicable state taxes.

How would it help employees?

Minimum wage laws allow tipped workers to be paid as little as $2.13 per hour, with the expectation that tips bring their total earnings to at least the $7.25 threshold for other workers. Eliminating taxes on tips would presumably leave more money in their pockets, effectively allowing tipped workers to take a tax deduction equal to the amount of their tip income.

Advocates for workers say service workers have struggled to make ends meet since 2020, when many lost their jobs during Covid lockdowns. Worker shortages emerged when restaurants and bars reopened in 2021, leading to big pay raises, signing bonuses and other perks.

According to Ben Reynolds, union leader with the independent union Restaurant Workers United, which represents workers in four states, conditions remained largely the same, much to the frustration of workers.

Wage growth in the leisure and hospitality sector peaked last year with a 12-month rolling average of 7.2 percent in January 2023, higher than the 6.3 percent average for workers in general.

Tax policy experts point out that exempting tip income wouldn’t help the majority of low-wage workers, though it would allow people to game the system by asking to be paid in tips instead of a traditional salary. Among the lowest-paid quartile of wage earners in the U.S. — those making less than $17.66 an hour — just 5 percent receive tips, according to an analysis by Yale University’s Budget Lab.

“If you work in a grocery store, you make the same total compensation (as a waiter), but all of their earnings are subject to tax because they don’t get tips,” said Lautz of the Bipartisan Policy Center. “There’s a fairness issue there.”

How much would it cost?

Tax cuts on tipped workers would have a “relatively small impact in the big picture” because tipped workers make up a small portion of the U.S. tax base, said Erica York, a senior economist at the Tax Foundation, a right-wing think tank. Yale’s Budget Lab estimates that tipped workers make up just 2.5 percent of the U.S. workforce.

According to an estimate by the Committee for a Responsible Federal Budget, federal revenues would fall by at least $150 billion to $250 billion over 10 years. That number could increase, however, if more workers were to start receiving tips.

The proposal would still add to the government’s projected $22 trillion deficit over the next decade, York warned. It also comes ahead of a legislative battle over the expiration of Trump’s 2017 Tax Cuts and Jobs Act, which could result in new cuts that further reduce federal revenues.

What are the political considerations?

Workers who receive tips are a key voting group in Nevada, one of seven states that will determine the presidential election. Tax cuts have long been central to Republican economic policies toward voters.

But the idea has also gained some bipartisan support. Nevada Senators Jacky Rosen and Catherine Cortez Masto are the first Democrats to back the bill, saying in a statement that it would provide economic relief to the state’s middle-class families.

US President Joe Biden previously proposed eliminating the minimum hourly wage for tipped workers, requiring employers to pay them their full wages in addition to the tips they receive.

Workers would likely welcome the tax cut, but some may have preferred to see other reforms in the industry, such as consistent schedules, said Reynolds of Restaurant Workers United.

While it may not convince all restaurant workers worried about making ends meet, the Republican proposal has become a catchy marketing tool. Trump’s campaign has asked supporters to appeal to service workers by writing a message next to the tip line on their receipts until Election Day: “Vote Trump for no tip tax!”