this is sort of a microcosm of socialism vs capitalism. that being the complex discussion that it is, i think your claim that its a "terrible and stupid system" is far from obviously true, if true at all.
1) its entirely possible and common to make a living wage in the tip system. my wife and i just ran the numbers and she grossed ~17$/hour between her two restaurant tip-based jobs - during COVID with capacity restrictions and lack of patronage (for cost of living reference, our house is ~$125/square foot so we're certainly not in NY or SV).
2) the tip system provides opportunity. it is a way for someone with no skills, education, prospects, or CV to start making steady money. eliminating it increases the risk for hirer as they their hiring cost changes astronomically from ~3$/hr to 10-20$/hr. this will close a window for advancement as taking chances on under-performing employees is more expensive; this results in an increase in heritable wage stratification as another path to the american dream is closed.
3) performance incentives are good by definition. you want all systems to have incentives aligned with the desired outcome. i dont see how removing the incentive structure improves the outcome for anyone except bad servers.
4) restaurants dont get a cut of tips. it is a direct transaction between customer and server (less taxes, obviously). this is the peak of efficiency. by forcing restaurants into being a middleman, you are creating a rent-seeker and lowering real economic output.
5) 2 and 4 make it more dangerous to open a new restaurant. raising the bar for entry into any business scenario is generally undesirable and produces less competition and creativity. less success and more expensive failure.
