McDonald’s CEO Challenges Tax Break That Favors Tipped Labor Models

McDonald’s CEO Chris Kempczinski has raised concerns about President Donald Trump’s "no tax on tips" provision included in the "Big Beautiful Bill," which was signed into law in July. The policy allows certain service-sector workers to deduct up to $25,000 in reported tips from their federal income taxes. Kempczinski emphasized during an interview with CNBC that the policy benefits businesses that rely on tipped labor but does not apply to McDonald’s, which does not collect tips. As a result, he argues, the policy exacerbates an “uneven playing field” between restaurants that use tipping to supplement wages and those that do not.

Kempczinski explained that the policy disproportionately benefits businesses that pay their employees a lower base wage—currently $2.13 per hour under federal law—as long as tips push total earnings to at least $7.25 per hour. McDonald’s, on the other hand, pays its employees a base wage that meets or exceeds the federal minimum wage without relying on tips. He suggested that this creates a scenario where restaurants that allow tipping are essentially “getting the customer to pay for labor” while also benefiting from tax deductions on those tips. This, he argued, gives those businesses an unfair advantage in labor costs.

The CEO also highlighted broader concerns about wage disparities. He noted that tipped workers in states where the $2.13 hourly wage remains in effect face a higher risk of poverty—around 18.5%—compared to 11.1% in states with equal minimum wages for tipped and non-tipped workers. These disparities underscore the economic incentives for businesses to rely on tipped wages rather than offer higher base pay, according to Kempczinski.

To address the issue, Kempczinski proposed a solution: establishing a single federal minimum wage for all workers, regardless of whether their compensation includes tips. He pointed out that eight U.S. states already enforce this approach, and studies suggest it reduces employee turnover and improves morale. McDonald’s raised its own minimum wage in 2021 by approximately 10%, with entry-level hourly wages ranging from $11 to $17 per hour. Kempczinski stated that the company is open to broader discussions on raising the federal minimum wage.

While the "no tax on tips" provision is framed as a benefit for certain workers, its impact is uneven. According to a report from the Yale Budget Lab, 37% of tipped workers in 2022 had incomes low enough that they did not owe federal income tax, meaning the tax deduction would not apply to them. Critics argue that the policy primarily benefits higher-earning tipped workers rather than the broader service workforce.

Kempczinski’s comments reflect growing industry discussions about the long-term sustainability of the tipped wage model, particularly in the context of rising labor costs and changing consumer attitudes toward tipping. Some delivery and ride-hailing platforms have faced public backlash over how tips are handled, with customers increasingly wary of being prompted for gratuities. While Kempczinski did not directly address these broader service-sector dynamics, his remarks reinforce a broader call for wage policies that promote fairness and consistency across the restaurant industry.

Source: [1] McDonald's CEO: No tax on tips creates 'uneven playing field' for its restaurants, which don’t get 'customers to pay' for labor (https://fortune.com/2025/09/03/mcdonalds-ceo-no-tax-on-tips-uneven-playing-field/) [2] McDonald's CEO: Tipped Wages Create 'Uneven Playing Field' for Restaurants (https://www.businessinsider.com/mcdonalds-ceo-tipped-wages-create-uneven-playing-field-2025-9)