- Most tipped workers already don’t pay federal taxes.
- Increasing the tipped minimum would do more.
Edit: really there should be no minimum lower than the hourly minimum.
I’m not an expert and I can plainly see that as well.
Tipping is a way for businesses to have the public subsidize not paying their employees enough. It has the added benefit of seeming like it is “pro-worker”, in that saying we need to get rid of tipping tends to be unpopular with those relying on tips.
But if the worker was making a living wage to begin with, they wouldn’t need the tips to survive. This highlights the problem: the money the business owner keeps to buy the new yacht is the same money that should be going to the worker, but instead, the worker gets the chance of the public subsidizing their wages while the business owner simply pockets more.
If tipping were outlawed tomorrow, many businesses would go under because they actually don’t have business models that support paying a living wage. This is the real problem, but it is very, very hard to fix since tipping is so socially accepted now.
It’s not some kind of sneaky thing where if workers are paid with tips the customers pay more. When workers are paid in normal wages instead of tips, the prices are just higher.
The problem is that many tipped workers love tips because most of the time they can avoid reporting all of them, so they pay less in taxes. Employers like them because it can make their prices seem lower because the price on something like the menu isn’t actually the final price someone pays. The people who hate tips are the customers who can never be sure what the final bill will be, and who often have to “tip” a minimum of 10%, often in advance, for service that isn’t tip-worthy.
It’s ridiculous to pretend that businesses don’t have business models that support paying a living wage, or that without tips they’d go out of business. The only difference is that they can list lower prices knowing that the final bill will include a tip. If tips were eliminated they’d just have to list the items with a slightly higher price. The customers also know that that tip is going to be included. Other than European tourists, nobody goes into a restaurant and thinks that the final bill will merely be the cost of the food they ordered. They know they’ll be expected to pay a tip too. Getting rid of tipping would just mean that the tip would be $0, and the food would be a bit more expensive.
Someone more eloquent and knowledgeable then me made an argument about how the ‘no taxes on tips’ was going to be step one and then ‘no limits’ on tips would be step two which would lead to some unholy abomination of tax evasion for the already insanely rich. I don’t remember where I saw that, though.
But it does solve the real problem of rich people not having another way to avoid paying taxes.
If you’re in Massachusetts, consider voting for Question 5 to end the separate tipping minimum wage. It’s a good first step
Specifically voting yes on that question.
You may have seen many restaurants putting out signs saying to vote no. That was done by management and front of house staff because they don’t want to pay their employees at the minimum wage and they don’t want to share their tips with back of the house staff (who also deserve the tips as much as FOH).
Abolish tipping. Make “gratuity” transactions illegal under IRS code so that the only way to “tip” is in cash. Overnight, the tipped staff will quit and the owners will be forced to pay a proper wage if they want to hire anyone.
Sometimes my company manages a project so well that we hit a performance bonus. I split that bonus amongst the members of that specific team, including prior contributors. I do not lower their salaries by twenty percent and expect the client’s bonus to offset the lower salary. If that would be craY for me to do, why isn’t it for restaurants.?
If you’re forcing people to quit then the execution is always not feasible. Most of these people are already struggling.
Amerika seriously needs to stop tipping outright. It’s out of hand, ridiculous, and is only going further out of control.
Tipping went from 10% to wait staff, to 20% and showing up everywhere. 10% was good when a meal cost $5. How the hell did it go to 20% when the meal is now $15? The percentage amount already means it keeps up with inflation.
Just pay your staff a livable wage and get rid of tipping entirely.
BuT tHaT woULD KiLL SmALl TiME ResTAuRAnts
The investor class has convinced many tipped workers that they will make less money if they receive a living wage. People dream of that big Saturday night rush where they go home with $1,000 in cash, while forgetting the far more common experience of struggling to pay bills because some cheapskate stiffed you on your only big table for the night.
Don’t forget that workers like tips because tips allow you to cheat on your taxes. I’ve never met anybody who worked in a tipped job who reported 100% of the tips they received.
Another issue is that everybody thinks they’re above average. Waiters / waitresses think that if there are no more tips, they (being above average) will lose out.
Hmm, what if instead of removing taxes from tips they make the tax rate on tips 100%? It would effectively eliminate tips as a source of income forcing companies to pay competitive wages without factoring tips in. Also if people knew 100% of their tips were going to the government they’d stop tipping pretty much overnight.
Perfect comment. This is me upvotting twice
But also tax the rich proportionally to their wealth, not just their taxable income and redistribute it to the poor.
“Increasing the tipped minimum would do more.”
n-n-n-NOPE.
paying workers a livable wage is the real answer.
as every other country with a livable minimum wage can attest to.
Get rid of tipping. Pay your workers!
Just because Ted Cruz introduced the bill and Trump endorsed it doesn’t make not taxing tips a bad idea. Remember, Harris endorsed it too.
It being a bad idea makes it a bad idea though. Why would this source of income be exempt from taxation? Why is that a good idea? Why is a salaried or hourly employee less deserving of having their income exempted?
Why should it be taxed? Not “Why it shouldn’t”.
Imo, income tax should only affect the rich, and they aren’t working tipped jobs.
Why should it be taxed? Not “Why it shouldn’t”.
Because income is taxed. We have a progressive tax system, so the first small amount is untaxed, the next is taxed at a low rate, the next is taxed at a slightly higher rate, and so on through the tax brackets.
You’re now saying that salary and hourly employees wages should be taxed, but not tipped income. So my question remains, why shouldn’t it be taxed? Why create an inequity between different sources of income.
Imo, income tax should only affect the rich, and they aren’t working tipped jobs.
Not taxing tipped income doesn’t achieve your stated goal. The majority of low and middle income wage earners are still taxed. Altering the tax brackets would be more fair, and come closer to achieving your stated goal. Exempting tips remains a terrible idea.
Just because Harris endorsed it doesn’t make it a good idea.
The real problem is billionaires no longer pay taxes.
Older I get, the more carving out exceptions leads to more corruption and cheating.
Good article.
