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“No tax on tips” is an industry plant

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Re: “No tax on tips” is an industry plant

#31

Some interesting points: ~40% of tipped workers don't make enough to get taxed anyway, no tax on tips would actually advantage better paid workers like casino dealers who don't need the help. NToT is described as a campaign to distract from minimum wage increase initiatives.

They may not pay any income taxes, but they almost certainly pay FICA taxes. If the NToT includes FICA, they would be better off. However, I still think it is terrible idea to advantage some employment classes and means of compensation over others like that.

Re: “No tax on tips” is an industry plant

#32
I think with any conversation about tips it is really important to recognize that laws vary dramatically across states[0]. I think talking about this can really drive at the real underlying issues with tipping.

IMO most discussions about tipping are a distraction. "Divide and rule" if you will.

  == THE LAW ==
  (or my best understanding. IANAL) 

  For most of the west coast (AK, CA, OR, WA): there is no separate "tipping wage". Tips are *always* on top of *at least* state minimum wage. There is only one minimum wage, so tipping is always a "bonus". 

  Other places, there are two "minimum wages", but that's confusing because at the end every employee has to make at least the normal minimum wage. The difference is that employers can use tips as credit against this. So, with the exception of Georgia (WTF GA!), employees *must* make the state's minimum wage (default federal). Using federal (min wage = $7.25) an employer *MUST* pay you *no less than* $2.13/hr. This is conditioned that you have made *at least* $5.12/hr in tips. The problem here is what tips count to what wages. Per day? Per week? Per paycheck? DOL says "workweek"[1]

  ============
So the real (main) problem is actually just straight up good old wage theft. Anyone who is not getting at least minimum wage is suffering from wage theft.

I've heard stories of employees not getting a paycheck "because employer thought it was all tips" (illegal b/c they credited too much) or very small paychecks with the explanation that the employer over-credited tips. There's at least a decently straight-forward way to show what can be credited, and this is why there's the tip amount that you log. Ignoring cameras, the burden is on the employer to prove that they can make these credits, so that line-item on the bill is important (IANAL)

  Personally:
I think the entire discussion of tipping often only serves as a distraction to wage. Like there's a lot of person to person fighting of how much we should tip (including not tipping) and frankly, doesn't this discussion often boil down to wage theft? I mean ignoring the already illegal problem of wage theft, what makes a server (who gets tipped) any different from a cashier (who doesn't get tipped) as an employee. Their jobs differ in duties, but we're talking about wage and *fair pay* here. If all the laws are followed, a tipped employee strictly benefits from tips. They have a statistical wage but that wage is max(base_pay, state_minimum) + random_value.

So I think 90% of discussions around tipping end up just being a distraction to create a fictitious divide of "minimum wage workers" vs "tipped workers"[2] who should instead be working as a coalition to increase the floor. They are both minimum wage earners! The main difference is primarily that tipped employees are just more likely to suffer from wage theft, due to how they are paid. But that's also something that both experience, just at different rates.

  TLDR:

  Getting rid of tips as a concept is a simple solution to the wage theft problem, but isn't the real problem just good old fashion wage theft? (second problem being "is minimum wage minimum"?)
[0] https://www.dol.gov/agencies/whd/state/minimum-wage/tipped

[1] https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-emplo...

[2] Simplifying by ignoring tipped earners with higher than min wage base pay (we can extend as needed)

Re: “No tax on tips” is an industry plant

#33

Don't forget to reduce your tips by the percentage they were previously being taxed, since it is all charity anyway. Hopefully this becomes another straw that will eventually break the camels back and we get rid of tipping all together. Every restaurant in the world does not need tips to survive, except for the ones in the US.

Tips subsidize profits, plain and simple. But, America runs on poverty, so this is in line with the broader socioeconomic strategy.

Re: “No tax on tips” is an industry plant

#34

All bonuses soon to be labelled as tips.

This is unlikely to be allowed, the last I checked, the law explicitly only allows "traditionally tipped jobs". How it gets interpreted and implemented in IRS Tax Code isn't clear yet, but they will probably have rules in place to prevent this.

Doesn't change the fact that it is a terrible idea.

Re: “No tax on tips” is an industry plant

#35

Earlier quoted context omitted.

https://jacobin.com/2025/07/restaurant-industry-tipped-submi... https://jacobin.com/2020/10/tipped-restaurant-workers-waiter... https://cepr.net/publications/customer-tips-are-providing-th...

I live in California and this isn't true here. All restaurant workers receive at least minimum wage before tips. In my city, that's $19/hour with health insurance. Of course, you're still expected to leave a tip and suggested minimum is now 20%, plus even McDonalds is charging $15 for a 4 oz burger, so I rarely go out to eat at places that expect a tip anymore. I'm not sure why they specifically should be tax exempt…

Yeah, there is a lot of shadiness going on these days. I don't think tips should be requested in any sort of transaction where the employee gets paid more than minimum wage. Restaurants always had this weird system where you could avoid paying your employees if they were tipped, so it was drilled into everyone's head "you're stealing from poor innocent workers if you don't tip 20%". But this is not the case for most workers, and so tips should be truly for exceptional service in cases where the job position is on a normal pay scale.

This isn't to say that I don't tip when not required to or that I only tip people I think are being underpaid, but ... things have gotten a little out of control. If I feel like tipping, I'll tip. I do not need a prompt suggesting anything when it's not coming out of the employee's takehome pay.

I hate to say it but I think some government regulation is required here.

Re: “No tax on tips” is an industry plant

#36
post #24

Earlier quoted context omitted.

I live in California and this isn't true here. All restaurant workers receive at least minimum wage before tips. In my city, that's $19/hour with health insurance. Of course, you're still expected to leave a tip and suggested minimum is now 20%, plus even McDonalds is charging $15 for a 4 oz burger, so I rarely go out to eat at places that expect a tip anymore. I'm not sure why they specifically should be tax exempt…

California doesn't have a special minimum wage for tipped professions? When I was waiting tables a long time ago I think my pay was $1.95 an hour. It was usually just enough to cover tax on tips (the ones we admitted).

California has not had a tipped minimum wage since at least the early 2000s, and I can’t seem to find any information on what is in the 1900s.

Re: “No tax on tips” is an industry plant

#37
How is an expected tip different from a commission other than who pays?

This is rather brilliant. * make it look like the government is stealing “gifted” money * stop taxing it * turn as many jobs as possible into tipped jobs supposedly for the person’s benefit * really the employer wins since they’ll pay less and claim “tips”

Re: “No tax on tips” is an industry plant

#38
post #24

Earlier quoted context omitted.

I live in California and this isn't true here. All restaurant workers receive at least minimum wage before tips. In my city, that's $19/hour with health insurance. Of course, you're still expected to leave a tip and suggested minimum is now 20%, plus even McDonalds is charging $15 for a 4 oz burger, so I rarely go out to eat at places that expect a tip anymore. I'm not sure why they specifically should be tax exempt…

California doesn't have a special minimum wage for tipped professions? When I was waiting tables a long time ago I think my pay was $1.95 an hour. It was usually just enough to cover tax on tips (the ones we admitted).

Looks like it changed in 1988 due to a state supreme court ruling about a 1975 law. The law said the tips were the "sole property" of the employee and couldn't be counted by the employer as wages.

https://www.latimes.com/archives/la-xpm-1988-11-01-mn-628-st...

Re: “No tax on tips” is an industry plant

#39

All bonuses soon to be labelled as tips.

At least the current version of the code has a ton of limits on what can be labeled tips, and the benefit phases out completely around $150k, and is only applicable to professional that traditionally receive a significant portion of income from tips - so it's not like you're going to have billionaires and PE fund managers paying themselves from their companies tens of millions in bonuses labeled as "Tips" and not paying any tax.

~90% of tipped workers REPORT less than $61k in income already. At that income, you're barely paying much income tax anyway.

This is just a trick to make people think they wouldn't have to pay social security and Medicare - which is the main tax they're paying - when in reality, ~90% of tipped workers will get next to nothing.

Re: “No tax on tips” is an industry plant

#40
post #7
post #2

It's also a joke, because anyone who's worked a service job knows there is no tax on cash tips (wink!)

I have an honest question: what's the cash vs card tip ratio? 99.999% of the time I am not carrying cash and I don't see many (any?) people paying with cash ANYWHERE in the last 10+ years.

At this point you are litterally a sucker to pay for anything in cash, because everything is marked-up to cover CC fees, which you get a portion of back in the form of rewards.

Yes, I know some places give cash discounts. Most do not.

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