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Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

theguardian.com

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Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#21

Post by kbolino »

throwaway48540 wrote: post #6
more_corn wrote: post #2

How about no tax on people below the poverty line? When I was young it always killed me to make so little and still pay taxes.

That's pretty hard to do when the absolute majority of the sum of taxes is paid by poor people. Even if you taxed the rich at 99%, it would be short by orders of magnitude - and then of course you have to consider https://en.m.wikipedia.org/wiki/Laffer_curve Also, there's a distinction between people below the poverty line, and young people making little wages in their early jobs. Why shouldn't we tax the rich kid wo…

From the perspective of government receipts, the bulk of taxes are paid by the middle, not the tails. The rich don't have enough numbers, and the poor don't have enough money, to offset the area under the middle of the curve. This isn't true everywhere, but is true in the US and most developed countries.

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#22

Post by IgorPartola »

MattPalmer1086 wrote: post #8

I assume business would just lower the amount they pay, since tips would be worth more.

Businesses already pay the exact minimum wage of $2.13/hour. The employees either make an additional $5.12/hour in tips or the employer must make up the difference at every pay period. Employees routinely underreport their tip earnings beyond the $5.12/hour to not pay taxes and fly under the DoL radar.

Edit: I should add that lots of states and some cities have their own minimum wage laws but they are all structured the same. There is a minimum wage like $10/hour but if an employee is tipped the employer can claim a “tip credit” of like $6 and pay the employee only $4. Then if the employee is underpaid the employer must. Make up the difference. Employees who routinely don’t make full tips are less likely to continue working at the restaurant but you can’t just legally fire them for not making enough tips.

I am sure lots of people have also noticed fast food restaurants pushing for tips for the crew at checkout. This is an industry shift. Same with single owner businesses asking for tips (generally if someone sets their own price a tip shouldn’t be expected, but Square et al made that a normal part of checkout and people now believe it’s necessary). With expected tips getting into the 25-30% territory I wonder if there is an opportunity here for a restaurant chain to advertise itself as “we pay our employees well so you don’t have to”.

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#23

Post by valiant55 »

MattPalmer1086 wrote: post #8

I assume business would just lower the amount they pay, since tips would be worth more.

I served for years, almost no one was claiming the exact amount of your cash tips. Credit card tips would automatically be tallied but cash tips are effectively under the table.

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#24

Post by nickfromseattle »

r00fus wrote: post #7
beaglesss wrote: post #5

What's more likely is some bean counter at the IRS realized enforcing taxes on tips cost more money to enforce than they gained, or was barely break even. It's an easy political win at no risk.

What's to prevent corporations and the rich from taking advantage of this? ie, my job is $10k + rest in "tips"?

The easiest seems like who is paying the "tip". If it's your employer, it's taxable compensation. If it's a customer, than it could be a tip.

Then there would probably be a bunch of sub-bullet points defining whether a tip is taxable depending on whether you have a direct relationship with the customer tipping you, whether the "tip" is mandatory, or at the discretion of the customer, are you in X roles (e.g. barista) within Y industries (e.g. food services).

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#25

Post by sqeaky »

Aunche wrote: post #10

Increasing the tipped minimum wage means that restaurants will add that cost to the menu. Because tips are based a percentage of your order, this means that customers actually pay more money in tips, even though these laws are marketed as reducing the need for tips.

Yet places with higher minimum wages don't always have higher burger prices at McDonald's.

And places with enforcement of minumum wages and no tips don't always have higher prices for food.

A very real alternative to your proposal is that market pressure could force prices down and eat into owner's profit. Market forces seem to be what controls the prices most places you can get food with and without tips.

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#26

Post by jfdjkfdhjds »

throwaway48540 wrote: post #6
more_corn wrote: post #2

How about no tax on people below the poverty line? When I was young it always killed me to make so little and still pay taxes.

That's pretty hard to do when the absolute majority of the sum of taxes is paid by poor people. Even if you taxed the rich at 99%, it would be short by orders of magnitude - and then of course you have to consider https://en.m.wikipedia.org/wiki/Laffer_curve Also, there's a distinction between people below the poverty line, and young people making little wages in their early jobs. Why shouldn't we tax the rich kid wo…

your first point is the only thing this whole discussion should be about... the second one is insanity :)

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#28

Post by beaglesss »

bena wrote: post #15
beaglesss wrote: post #5

What's more likely is some bean counter at the IRS realized enforcing taxes on tips cost more money to enforce than they gained, or was barely break even. It's an easy political win at no risk.

I don't think this is spearheaded by the IRS at all.

I don't think so either, but they likely have useful data that politicians can draw off of. Remember Milton Friedman, who wanted to eliminate many forms of taxes, came up with a lot of his policies after working at the Treasury department on taxation mechanisms.

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#29

Post by duxup »

bko wrote: post #12

I don't like tipping culture, but it does allow for wealthy people to subsidize service and incentivizes good service. People that are more price sensitive tip lower and every once in a while a waiter will experience an extremely generous tip. I'm not convinced that forbidding tips would increase net wages paid to servers. In terms of who is paying, restaurants will simply raise prices to account for higher wages. Th…

>and incentivizes good service

Does it?

I think for most folks getting lots of tips they find that he tips feel more like they're going to be... whatever they're going to be. Meanwhile their day to day job is more about other things going on, or if the food came out cooked wrong ... not so much something they control like a light-switch enough to make changes.

I'm not sure that incentivizes much at all.

Re: Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?

#30

Post by kitkat_new »

bko wrote: post #12

I don't like tipping culture, but it does allow for wealthy people to subsidize service and incentivizes good service. People that are more price sensitive tip lower and every once in a while a waiter will experience an extremely generous tip. I'm not convinced that forbidding tips would increase net wages paid to servers. In terms of who is paying, restaurants will simply raise prices to account for higher wages. Th…

tips incentivize to be white, young and female - there is almost no correlation between service quality and tip size:

https://www.sciencedirect.com/science/article/pii/S036233199...

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