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Is this the solution to California's soaring insurance prices due to wildfire risk?

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Is this the solution to California's soaring insurance prices due to wildfire risk?

In the past several years, homeowners across the state have been either burdened with extremely high insurance premiums or have struggled to find coverage at all. Wildfires have sent California’s homeowners insurance market into crisis and the situation is only getting worse. So far, 2024 has seen 219,247 acres burned, more than 20 times the amount this time last year. As wildfires become more frequent and destructive, insurers have worked to lower their risk exposure through rate hikes, nonrenewals, and even halting new policies in the state entirely.

New buyers and those whose policies have not been renewed have limited options since the biggest companies, State Farm, Farmers, Allstate, USAA, Travelers, Nationwide and Chubb, have limited or paused new policies in the last few years. Earlier this month State Farm’s cancellations of 30,000 homeowner policies mostly in high wildfire risk areas, took effect. In late June, State Farm requested a 31% rate increase, its largest increase in recent history, on the heels of a 22% increase earlier this year. Allstate also recently filed a request for a significant 34% rate increase.

Homeowners are finding the expense and lack of options unsustainable. Sharon Goldman, longtime resident of the Pacific Palisades, has not had her policy canceled yet, but she has seen increases to her premium and worries she could be next. In her ZIP Code the wildfire risk is high, and State Farm decided to not renew 70% of their policies. Starting in 2019, rates of nonrenewals in high- and very high-risk areas grew to 14% compared with 3% and 2% for moderate- and low-risk areas.

Goldman, using her maiden name out of concern for retribution from State Farm, has paid her premiums each year since she bought her home 50 years ago. She has never filed a claim. But she has seen her rate increase 78% in the past two years. Her agent has told her that her fire coverage will be replaced with the state-run FAIR plan in 2025, an increasingly common insurer strategy that leaves homeowners paying more for less coverage.

Sharon Goldman poses for a portrait near her home in Pacific Palisades on June 12, 2024 in Los Angeles, CA.

Sharon Goldman poses for a portrait in Pacific Palisades in June. She is one of the many California homeowners struggling to maintain home insurance as costs increase and policies are dropped due to wildfire risk.

(Dania Maxwell/Los Angeles Times)

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Goldman and her neighbors are left wondering what options they have left. She hears stories of people paying tens of thousands a year, an impossible amount for her to cover on her retirement budget. She has started looking into moving out of state and out of the home where she raised her children.

While the state does not require insurance, mortgage lenders do. So, going without is not an option for many. Those whose mortgage is paid off, like Goldman, may not be comfortable leaving their home, typically their most expensive asset, uninsured. High rates and loss of fire coverage have pushed desperate homeowners to riskier nonadmitted carriers or to the state-run FAIR plan, meant to be the plan of last resort. But the California Department of Insurance worries that it is quickly becoming overburdened.

Over the past year, Insurance Commissioner Ricardo Lara has been rolling out his plan to increase policy writing in vulnerable areas and get people off of the FAIR plan. One big component of his strategy is allowing insurers to use wildfire catastrophe models to set overall rates. Insurers say the tool would help them more accurately predict the correct rate for the amount of risk.

As a trade-off, Lara says companies that use these models will be required to increase service in distressed areas with a high wildfire risk and a high concentration of FAIR plan policies.

In public workshops held by the Department of Insurance, consumer advocates raised concerns about a lack of transparency with “black box” models that may be used to justify unnecessary rate hikes. Industry advocates are concerned the plan will take too long to implement when they desperately need changes now.

How likely is it a house will be damaged in a wildfire?

There are many versions of catastrophe models. Each modeling company has their own proprietary analysis but they all generally use the same data inputs to answer the same question.

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Fire fighters work to douse a home on fire in Harwarden Hills, a high-end living

The Harwarden fire burned over 500 acres, destroying three large homes and damaging seven others.

(Jen Osborne / For the Times)

Each modeled event starts with an ignition, the probability that a fire will start at that location, spread, the probability that the fire will travel based on the land cover in the area, and property characteristics. Using those data, the model simulates a large number of possible outcomes for a given location, estimates the likelihood that a structure will burn from wildfire, and calculates the loss for any buildings there.

The USDA Forest Service developed a national analysis of wildfire risk that is similar to what models created for insurance companies would look like. Based on vegetation and fire-behavior fuel models, topographic data, historical weather patterns and long-term simulations of large wildfire behavior, their wildfire likelihood map shows the probability of a fire in any given year.

A critical part of predicting the potential spread of the fire is the available fuel. The Forest Service’s land cover classifications are used in many wildfire models. They specify 40 different fuel types such as grass, shrub, timber, and nonburnable types. Each category is further subdivided based on depth of the cover and humidity or aridity of the climate.

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For example, in an arid climate, coarse continuous grass at a depth of 3 feet would have a very high spread rate. A combination of low grass or shrubs and dead leaves or needles in the forest would have a low spread rate.

Property characteristics such as the type of roof or whether the siding is fire-resistive make a significant difference in whether a structure will ignite from wildfire embers. The Center for Insurance Policy and Research found that structural modifications can reduce wildfire risk up to 40%, and structural and vegetation modifications combined can reduce wildfire risk up to 75%.

All of these factors are combined in the model with information about the rebuilding cost and level of coverage to generate an amount of risk unique to the individual property.

Could these models turn the industry around?

Currently, companies are required to calculate their projected losses, on which their overall rates are based, using a historical view of wildfire loss over the previous 20 years. As wildfires increase, however, this means that the average loss trails behind the current state of wildfire risk.

Nancy Watkins, an actuary and principal at the insurance consulting firm Milliman, said that she believes the inclusion of catastrophe models could save the industry. She analyzed the effect of a model on rates compared with using just historical experience. While the rates would generally be higher, the increases would be more even.

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In April during a public meeting, Allstate said that if wildfire catastrophe models were allowed, they would once again start writing new policies in the state.

But wildfire catastrophe models are already used by insurance companies in California for some business decisions and have been for some time. They use models to determine where to write or renew policies, which is one of the reasons nonrenewals have disproportionately happened in high-risk areas.

In recent rate filings, Allstate, Farmers and State Farm cited a modeled wildfire risk score as the basis for not renewing policies. Allstate used CoreLogic’s Risk Meter score in 2019 to classify all policies that fell above certain risk thresholds as ineligible for renewal. A 2023 filing from Farmers documents eligibility guidelines for new and renewing policies that sets a risk level using Verisk’s FireLine and Zesty.ai’s Z-FIRE scores. State Farm’s recent 30,000 nonrenewals are based on CoreLogic’s Brushfire Risk Layer.

Amy Bach, executive director of United Policyholders, says that wildfire models worked their way into rates without enough state oversight. “We didn’t regulate the use of risk scores and now [they] are having a dramatic impact on the market and the genie is out of the bottle.”

Some companies use models to assess relative risk between properties and adjust individual rates accordingly. State Farm multiplies its base rate by a location rating factor, calculated using catastrophe models produced by CoreLogic and Verisk. Areas with high wildfire risk have seen dramatic increases in the location rating factor in the past few years.

This process is called segmentation and the Department of Insurance is aware that it is opaque. Department spokesperson Michael Soller says, “People do not know what their risk score is. They don’t know what goes into the risk score. It’s a black box. Yet, the risk score can be used to [charge you] double what somebody else pays.”

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While these situations are significant for some, they generally only apply to select high-risk properties. The median effect of the location rating factor has remained fairly stable.

But under the commissioner’s new policy, model results could also be incorporated directly into the overall rate. Soller says that one important difference in this new regulation is that for a model to be valid, it will need to incorporate property and community level risk mitigation into rates, including state agency forest thinning and utility company efforts. As more investment goes into making communities safer, in theory the rates should decrease.

Only you can prevent forest fires?

Wildfire mitigation happens at the state and local level. Since 2020, in addition to baseline spending, California has allocated more than $2.6 billion towards its wildfire and forest resilience package. 872 communities in the state are registered participants in Firewise USA, a program administered by the National Fire Protection Association that sets standards for fire safety.

For an individual, retrofitting one’s home for wildfire resistance is not cheap. On average, homeowners spend $15,000 on a new roof.

As of October 2022, companies such as State Farm that use wildfire models in segmentation are already supposed to give mitigation discounts. A February filing from State Farm breaks down how their discounts would work in a low-, medium- and high-risk area.

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For the low-risk group, the dollar amount saved may not be worth the investment in mitigation. For the high-risk group, the slightly lower percentage reductions would still result in more substantial dollar amounts saved.

According to the State Farm documents, these discounts are given at a set rate for all properties across the state. Granular catastrophe models take into account the impact of mitigation on the property level, nearby community mitigation and any recent wildfire history that might indicate a temporarily reduced risk.

However, a complaint raised several times during the regulation workshops was that when homeowners do spend money, often thousands, on lowering risk, they do not see any changes in their insurance premiums. Some say their policies were still dropped.

Goldman has already completed the property-level mitigation work. She has a class A Spanish tile roof. She does the brush clearance every year. This past year it cost about $1,200. She even has an outdoor sprinkler system. But she did not learn about mitigation from her insurance company. Instead, it was on one of Bach’s monthly educational community calls where she got the idea to install fire-resistant vents.

Sharon Goldman walks through the exterior of her home
A close-up of fire vents.
A bare yard with cleared brush

Sharon Goldman walks through the exterior of her home where she has lived for about 50 years and raised four kids in Pacific Palisades. (Dania Maxwell/Los Angeles Times)

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And yet, she has not received a mitigation credit from State Farm and has not received any information about how to receive one. When she asked her agent whether the work she had done on her home qualified for a discount he said no. The Department of Insurance says that they review consumer complaints for rate accuracy and conduct regular examinations of insurance companies. They noted that concerned consumers should contact them to review their specific situation.

Making models a reality

The catastrophe modeling regulation requires insurers to submit their modeling information to the Department of Insurance for review by an internal model advisor and any necessary consultants. Some proprietary information is allowed to remain confidential but proponents of the plan say that the regulators will have all the information they need to assess the models even if the general public does not.

Fire fighters work to douce a home on fire in Harwarden Hills, a high-end

Firefighters work to douse a home on fire in Harwarden Hills, a high-end living community in Riverside.

(Jen Osborne / For The Times)

The department says it is still considering public input from the most recent workshop and has no further plans for additional workshops. Once the regulation is finalized there will be a public hearing. Commissioner Lara plans to have this regulation and the rest of the Sustainable Insurance Plan in place by the end of the year.

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In addition to forward-looking catastrophe models, Lara’s plan will introduce the ability for insurance companies to include reinsurance costs in rates and to increase coverage in the FAIR plan. Details for both of those changes are expected to be released this month.

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How Hard It Is to Make Trade Deals

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How Hard It Is to Make Trade Deals

President Trump has announced wave after wave of tariffs since taking office in January, part of a sweeping effort that he has argued would secure better trade terms with other countries. “It’s called negotiation,” he recently said.

In April, administration officials vowed to sign trade deals with as many as 90 countries in 90 days. The ambitious target came after Mr. Trump announced, and then rolled back a portion of, steep tariffs that in some cases meant import taxes cost more than the wholesale price of a good itself.

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The 90-day goal, however, is a tenth of the time it usually takes to reach a trade deal, according to a New York Times analysis of major agreements with the United States currently in effect, raising questions about how realistic the administration’s target may be. It typically takes 917 days, or roughly two and a half years, for a trade deal to go from initial talks to the president’s desk for signature, the analysis shows.

Roughly 60 days into the current process, Mr. Trump has so far announced only one deal: a pact with Britain, which is not one of America’s biggest trading partners.

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He has also suggested that negotiations with China have been rocky. “I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” Mr. Trump wrote on Truth Social on Wednesday. China and the United States agreed last month to temporarily slash tariffs on each other’s imports in a gesture of good will to continue talks.

Part of what the president can accomplish boils down to what you can call a deal.

The pact with Britain is less of a deal than it is a framework for talking about a deal, said Wendy Cutler, the vice president of the Asia Society Policy Institute and a former U.S. trade negotiator. What was officially released by the two nations more closely resembled talking points for “what you were going to negotiate versus the actual commitment,” she said.

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During his first term, Mr. Trump secured two major trade agreements, both signed in January 2020. One was the United States-Mexico-Canada Agreement, which was a reworking of the North American free trade treaty from the 1990s that had helped transform the economies of the three nations.

U.S.M.C.A. is an all-encompassing, legally binding agreement that resulted from a lengthy and formal process, according to trade analysts.

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Such deals are supposed to cover all aspects of trade between the respective nations and are negotiated under specific guidelines for congressional consultation. Closing the deal involves both negotiation and ratification — modifying or making laws in each partner country. The deals are signed by trade negotiators before the president signs the legislation that puts it into effect for the United States.

Mr. Trump’s other major agreement in his first term was with China, in an echo of the current trade war. The pact, unlike previous deals, came about after Mr. Trump threatened tariffs on certain Chinese imports. This “tariff first, talk later” approach, said Inu Manak, a trade policy fellow at the Council on Foreign Relations, is part of the same playbook the administration is currently using.

The result was a nonbinding agreement between the two countries, known as “Phase One,” that did not require approval from Congress and that could be ended by either party at any time. Still, it took almost one year and nine months to complete. China ultimately fell far short of the commitments it made to purchase American goods under the agreement.

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A comparison of the two first-term Trump deals shows the drawn-out and sometimes winding paths each took to completion. Fragile truces (including ones made for 90 days) were formed, only for talks to break down later, all while rounds of tariffs injected uncertainty into the diplomatic relations between countries.

The Times analysis used the date from the start of negotiations to the date when the president signed to determine the length of deal making for each major agreement dating back to 1985 that’s currently in effect. The median time it took to get to the president’s signature was just over 900 days. (A separate analysis published in 2016 by the Peterson Institute for International Economics used the date of signature by country representatives as the completion moment and found that the median deal took more than 570 days.)

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With roughly one month before the administration’s self-imposed deadline, Mr. Trump’s ability to forge deals has been thrust into sudden doubt. Last week, a U.S. trade court ruled he had overstepped his authority in imposing the April tariffs.

For now, the tariffs remain in place, following a temporary stay from a federal appeals court. But in arguing its case, the federal government initially said that the ruling could upset negotiations with other nations and undercut the president’s leverage.

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In a statement on Wednesday, Kush Desai, a White House spokesman, said that trade negotiators were working to secure “custom-made trade deals at lightning speed that level the playing field for American industries and workers.”

But in other recent public statements, White House officials have significantly pared back their ambitions for the deals.

In April, Scott Bessent, the Treasury secretary, hedged the number of agreements they might reach, suggesting that the United States would talk to somewhere between 50 and 70 countries. Last month he said the United States was negotiating with 17 “very important trading relationships,” not including China.

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“I think when the administration first started, they thought they could actually do these binding and enforceable deals within 90 days and then quickly realized that they bit off more than they could chew,” Ms. Cutler said.

The administration told its negotiating partners to submit offers of trade concessions they were willing to make by Wednesday, in an effort to strike trade deals in the coming weeks. The deadline was earlier reported by Reuters.

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The current approach to deal making may be strategic, Ms. Manak said. One of the benefits of not doing a comprehensive deal like U.S.M.C.A. is that the administration can declare small “victories” on a much faster timeline, she said.

“It means that trade agreements simply are just not what they used to be,” she added. “And you can’t really guarantee that whatever the U.S. promises is actually going to be upheld in the long run.”

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Data and graphics are based on a New York Times analysis of information from the Congressional Research Service, the U.S. Trade Representative, the Organization of American States’ Foreign Trade Information System and public White House communications.

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Terranea Resort accused of pregnancy discrimination, retaliation in lawsuit

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Terranea Resort accused of pregnancy discrimination, retaliation in lawsuit

A former marketing executive at the Terranea Resort sued the luxury establishment on Wednesday, alleging its president had made discriminatory comments towards pregnant women working at the company.

The former marketing exercutive, Chad Bustos, alleges in the lawsuit filed on Wednesday that he was fired in retaliation after he defended several female employees.

Terranea Resort and the company’s president did not respond to a request for comment about allegations in the lawsuit, which was filed in Los Angeles County Superior Court.

Bustos said he had worked at the 560-room oceanfront resort that perches on the Palos Verdes Peninsula since 2023. He had supervised an all-female marketing team, of which three employees were young moms with children under 3, according to the complaint.

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The lawsuit describes a meeting in February 2024, where the resort’s president, Ralph Grippo, became “visibly angry” after hearing a woman on the team planned to take maternity leave. Her announcement had come months after another employee had returned from maternity leave.

Grippo, who also is a defendant in the lawsuit, allegedly stood up, pushed his chair back and began questioning the other women in the room. The lawsuit said Grippo pointed at each woman in turn, asking, “Are you pregnant?” After each woman answered, he sat back down and the meeting continued.

After the meeting, Grippo allegedly began “scrutinizing the marketing team and nitpicking their performance,” using the resort’s security cameras to see what time they arrived to work and when they left. He told Bustos to write up the women for what he deemed to be minor infractions, but Bustos refused, according to the complaint.

At another meeting in May 2024, Grippo scolded female employees for not working hard enough, although the team was high-performing and employees worked long hours, the lawsuit said.

Grippo was reported to the human resources department by one of the women, and Bustos confirmed her claims to the department, the lawsuit said. Bustos also confronted Grippo around that time, telling him his comments were inappropriate, according to the complaint.

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After that, Grippo refused to speak with Bustos or return his calls, the lawsuit alleged, and in August 2024, Grippo fired Bustos.

Under California law, it is illegal for employers to ask employees about medical conditions, including pregnancy.

And anti-pregnancy comments can be used as evidence of sex discrimination, said Lauren Teukolsky, the attorney representing Bustos.

Bustos, who had worked with Grippo for 11 years at another company prior to joining him at the Terranea Resort, said in an interview that he initially thought Grippo would understand his perspective because of their long-standing relationship.

Bustos said his team was “very talented and hardworking,” and the sacrifices they and others have made to raise children “should be important for everybody.”

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Grippo had had a history of making other anti-pregnancy comments, the lawsuit alleged.

When a woman asked Grippo for a promotion, he allegedly questioned her about how she planned to balance the promotion while raising a child. He asked another woman with two children who applied for a marketing job if her work schedule was going to be a problem since she was a mom, the lawsuit said.

Grippo wrote up another pregnant employee because she came in 15 minutes late as a result of morning sickness, and questioned another pregnant employee why she had so many doctor’s appointments, the lawsuit said.

In 2017, former dishwasher and chef assistant Sandra Pezqueda sued the resort and a staffing agency after she allegedly experienced repeated sexual harassment and assault by her supervisor, who then retaliated against her by changing her work schedule after she rejected his advances.

Pezqueda received a $250,000 settlement with the company denying any wrongdoing, news reports said.

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Then-president Terri A. Haack said in a statement to Time that the company has “a zero-tolerance policy toward harassment.”

The Terranea resort is jointly owned by JC Resorts, a company with a portfolio of resorts and golf courses based in La Jolla, and Lowe Enterprises, real estate investment firm based in Los Angeles. The companies did not immediately respond to a request for comment.

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An Illustrated Guide to Who Really Benefits From ‘No Tax on Tips’

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An Illustrated Guide to Who Really Benefits From ‘No Tax on Tips’

There’s no question that President Trump’s proposal to stop taxing tips has broad appeal. It’s popular in polling, lawmakers in both parties support it, and now a version of the idea is on its way to becoming law.

But the effect of the policy would actually be quite narrow. About 3 percent of American workers receive tips, but about a third of those employees would not see a gain from the change.

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That’s because of the way Republicans structured the policy in the tax legislation they passed through the House recently. Here’s who would benefit under their plan — and who wouldn’t.

The proposal would leave out workers who are not tipped.

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The tax break is good news for people in industries like dining, where tips are a big part of worker pay. But it also means that two employees making the same amount, one a bartender and one a retail salesperson, could soon face very different tax bills.

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These two workers each make $40,000, but the tipped worker would owe a lot less in taxes.

Note: Potential additional effects of tax credits or other less common deductions are not included.

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The tax exemption would create a huge incentive for more people to try to earn tips. The Republican legislation lays out some ground rules, tasking the Treasury Department to limit the tax break to jobs in which workers have traditionally received tips. This could become the subject of intense lobbying, as companies try to convince the government that their employees deserve the tax break. Uber and DoorDash have already pushed to make sure their drivers can qualify for tax-free tips.

Many of the lowest-earning tipped workers wouldn’t benefit much, or at all.

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Another obstacle to benefiting from the tax break is the way income is taxed in America. In general, before they pay taxes, Americans subtract deductions from their income, and then the government assesses tax on that smaller amount of money.

Everyone can take the standard deduction, which would be worth $16,000 for individuals and $32,000 for married couples this year under the Republican tax bill. “No tax on tips” would take the form of a deduction people can claim on top of the standard deduction, shrinking their taxable income even more.

But for a tipped worker who doesn’t make much more than the standard deduction — say a college student who waits tables over the summer — the ability to claim an additional deduction would not generate much in tax savings. Someone making less than the standard deduction would have no taxable income to begin with.

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The policy would save this low-wage waiter a small amount.

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Note: Potential additional effects of tax credits or other less common deductions are not included.

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It’s important to note that the tips exemption applies only to the federal income tax. Workers would still owe payroll taxes, like the 6.2 percent Social Security tax, on their tipped income. They may also owe state income taxes on their tips.

For many low-income Americans, payroll taxes, rather than the income tax, are the biggest taxes they pay. Roughly 37 percent of tipped workers already don’t owe any federal income tax, according to an estimate from the Budget Lab at Yale.

Others wouldn’t gain because other benefits already eliminate their tax burden.

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There are other tax breaks that could eliminate a worker’s tax liability before “no tax on tips” comes into the picture. For example, a full-time Uber or Lyft driver who can take advantage of the mileage deduction, which increases with every mile driven, may not have much use for another tax break.

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The policy wouldn’t make a difference for this ride-share driver.

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Note: Business deductions included are for qualified business income and business use of a car. The amounts differ under a “no tax on tips” policy because the deductions would interact. Potential additional effects of tax credits or other less common deductions are not included.

An exception to this would be tax benefits that are “refundable.” These are tax credits, like the earned- income tax credit, that give money to Americans even if they don’t owe anything in income tax. So these tax credits can become cash payments to low-income Americans. Because of that, workers could conceivably use the tips deduction to reduce their tax bills to zero and still receive the same benefit from a refundable tax credit.

The more money someone makes, the bigger the benefit.

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The deduction would be most meaningful for those who make enough to owe a fair amount in income taxes. A typical tax cut for someone earning enough to benefit from the plan could be worth roughly $1,800.

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This hairdresser would save the typical amount among those who would benefit.

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Note: Potential additional effects of tax credits or other less common deductions are not included.

This dynamic is a microcosm of how cuts to income taxes often work: The more money you make, the more you pay in tax and therefore the more you save from a tax cut. In this case, though, your benefit would depend both on how much you make and what share of your income comes in the form of tips.

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This Las Vegas blackjack dealer would save a lot based on his significant tips.

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Note: Potential additional effects of tax credits or other less common deductions are not included. Figures are rounded.

This would be true up to a point. The Republican legislation would bar tipped workers making more than $160,000 from claiming the break. (That level would apply for this year and increase over time.)

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The cut-off is a stark one. A tipped worker making $160,001 would, under the bill, receive nothing, potentially encouraging people to try to lower their earnings to claim the tax break. Making that extra dollar could mean thousands in additional taxes.

“No tax on tips” could end up as a short-lived experiment. In the House-passed bill, the policy would last only through 2028, though the legislation could change in the Senate.

Many tax-policy experts are rooting for the demise of the deduction, which they see as another potential hole in a tax system so strewn with carve-outs that it is often compared to Swiss cheese. In general, they would prefer a system that charges roughly the same tax on workers with roughly the same earnings, rather than creating a tax advantage for certain types of work.

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“It’s the exact opposite of the general principles that tax policy purists advocate for,” said Joseph Rosenberg, a senior fellow at the Urban Institute.

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About the data

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Illustrated examples were constructed using data from a summary of the House Republican bill (proposed tips policy, standard deductions and tax rates); the Bureau of Labor Statistics (typical wages by occupation); companies and industry groups (estimated typical tip shares); and analyses from the Budget Lab at Yale and the Tax Policy Center (distributional effects of the policy). Workers in all examples have a single tax-filing status.

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