From "Not taxing tips is a dumb gimmick. Harris is wrong to follow Trump. The Biden-Harris team dismissed an idea it now embraces. How it went from a waitress to mainstream."
By the Editorial Board of The Washington Post.
By the way, the word "tips" appears many times in the piece but is only in quotes in "a Black Jack dealer who earns most of her money from 'tips.'" Is there some special bullshit to the tipping of blackjack dealers? (By the way, it's "blackjack," not "Black Jack.")
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I just consulted with my Mrs., who was a blackjack dealer in Vegas in the 1970s. She says she never made the money she could have if she hadn't been such a good dealer for the house, to start with. If you are adorably cute (she was) and deal giant jackpots (she didn't) you can make a lot of money.
She also mentioned that we all know that everyone always reports all cash tip income (wink, wink) and the move away from cash to tips via credit card provides a paper trail that would lead to the current rush to exempt tip income. "Fairness" to non-tipped workers is a fungible concept in an election year, much like the universality of college loans to be forgiven.
Harris' tip tax flip-flop is also an admission that the Democrats envision an economy even more dominated by personal service gig work like Uber and DoorDash, rather than traditional production jobs.
the move away from cash to tips via credit card provides a paper trail that would lead to the current rush to exempt tip income.
i have to say.. Now it All DOES make sense.
Many reasons to exclude tips IMO: 1) most workers earning tips are officially paid the minimum wage and the tip portion of their income is highly variable; 2) yet the IRS imposes a fixed rate at which employers withhold taxes for tipped workers causing an uneven burden on the employee who earns far less than a blackjack dealer and may even earn less than the 15% assumed by IRS rules; 3) this creates a disincentive to correctly report tips because the employee may have to overpay some of the time the temptation to “average” or bank tips in boom times to cover losses for lean times is great and even greater when we are living through an undeclared recession. Like now.
I could go on but I’ll wrap up with a final libertarian approach. Not taxing tips is good start for acquiescing the general public to the idea of excluding all income from taxes. Take the tiny victories where you can get em.
Stolen Pander
"the move away from cash to tips via credit card..."
Didn't that happen decades ago?
Not for blackjack dealers and other cash businesses, causing another uneven burden on the workers who are paid via CC.
Collection and enforcement cost can outweigh the actual revenue collected, at least for the cash portion. It is a very inefficient tax, and eliminating it adds incentives at the entry level to join the labor market, obviously a good thing.
A bigger deal is the impending Harris policy announcement on ending "Price Gouging". That is, enabling tens of thousands of inspectors at the FTC to demand justification of pricing across the retail chain. This will add to costs, and boost inefficiencies, increasing inflation. Very anti-green.
It is Idiocy Cubed.
All senior politicians should have to read and understand Hayek's "Use of Knowledge in Society".
Or when tipped in the House chips.
"Not for blackjack dealers..."
Ah. Right. So this really shows that the proposal is about winning Nevada.
Why should a warehouse stocker, a grocery store checker, a security guard or a sanitation worker need to pay taxes on all their income but not a Black Jack dealer who earns most of her money from 'tips'?"
By using a blackjack dealer as the example, is the WaPo trying to make the tip exemption seem more regional and inequitable?
see? now it DOES all make sense!
I kind of skipped right over the deliciously ironic idea of the WaPo editorial board calling any idea or entity “dumb.” Cmon. “Dummy heal thyself!”
That is an unusual concern she faces, NV being a tossup this cycle.
Low paid workers pay low taxes so the tax on tips is low too. It's the wall street guys who will make out on tips not being taxed.
I assume tipping blackjack dealers is in return for not tossing you out for counting cards.
Although I do not agree with the substance of the bill (I think all income should be taxed for all of us), whoever came up with that idea is a smart/devious SOB.
Kroger forbids tipping for workers bringing stuff to your car, the website says. I assume to prevent deal making.
Nice. Although I seemed to tip the most in a St.Louis MO area casino when the dealer was beautiful with overflowing cleavage. My results be damned.
If you pay 10% tip on Amazon groceries delivered to your door, the bags are lined up really neatly.
Nevada made a big show of cleaning up their voter rolls a few weeks ago. It creates a problem for Democrats…
I think it was hard for the gaming union leaders to support her unless she matched Trump’s policy. She needed their endorsement and their money.
The advantage for card counters is very thin and fleeting. Generally they can’t afford to tip…
…besides, tipping to stay doesn’t work. Someone else in the pit or in the security room is the one who makes the call to back you off…
…besides, tipping to stay doesn’t work. Someone else in the pit or in the security room is the one who makes the call to back you off…
Mike (MJB Wolf) said...
"Many reasons to exclude tips IMO: 1) most workers earning tips are officially paid the minimum wage and the tip portion of their income is highly variable..."
Back in the stone ages when I was in college (mid '80s), I worked for a local pizza joint. Minimum wage was $3.35/hr (recently up from $3.25), but the wait staff was paid $2.15/hr (up from $2.00) on the expectation that the difference would be made up in tips. And the waitresses (there was only one token waiter) would make good money, especially in the evenings and weekends. Often they were working their way through college, or were young mothers bringing extra money into the household while the husbands or parents watched the kids in evenings or weekends.
As a delivery driver, I was paid minimum wage, plus a modest commission on the dollar amount delivered (*). But we also got tips. I was making $9-$10/hr on Friday/Saturday nights. I felt - not quite Rich, but was making good money.
The best days were holidays, especially Super Bowl Sundays. Everyone had to hustle their ass off, but I was pulling $22-$25/hr - 7-8 times minimum wage.
(*) - There was one guy who would order a side of fries and a six pack of beer for $6.85. He lived out of the way and would always order in the middle of the dinner rush, so nobody else wanted to deliver. I would grab the order as soon as it was ready so he got his fries were fresh and hot. It turns out he was a semi-disabled vet who would give me a $20 and say keep the change.
Or when former service workers make an effort to tip out with cash as a lifetime practice. It is getting harder and harder to do.
It isn't the tip taxation that is objectionable, it is more the IRS assumption of a dollar value of the tips you may have gotten based on hours worked and the penalties for disagreeing with the IRS over reality versus their assumptions.
The left side of the governing spectrum doesn't approve charity and other voluntary redistribution schemes. Besides, who will sustain their Green deals and other price and availability schemes that are first-order forcings of catastrophic anthropogenic climate change.
In 2022 Vice President Harris cast the tie breaking vote in the Senate to pass the bill that cracked down on the service industry,s reporting of tips so they can be taxed.
Wikipedia’s example didn’t use a black jack.
From where do we get the idea that the wait staff in small restaurants are rolling in dough from their tip income? My idea of who the Democrats are targeting is not the relatively small number of blackjack dealers in Las Vegas — it’s the single mother who is trying to makes ends meet for her and her kids by waiting on tables at the little Italian eatery the wife and I sometimes walk to.
I have never met a competent server who would give up her or his below-minimum wage per hour for $25 an hour. Why should servers and bartenders get income exempted from taxation, while the vast majority of the rest of us don't? Strictly a campaign promise. Originated with Trump and Harris stole it. No matter who wins, I bet it doesn't happen.
A Jack dealer who is Black. A Black Jack dealer.
I'm going to make an exdtrodinary assumption, Mike. I'm going to guess that the amount of revenue the tax brings in isn't worth the amount of money spent to collect it.
Right, Blackjack is the game. Black Jack is General John J. Pershing.
I have yet to hear an explanation for this change in the tax law favoring those who make a portion of their earnings on tips. As the first post points out, it's as fair as college loan foregiveness. But I have a great proposal. How about no tax on fixed pensions of retired persons.
it's "blackjack," not "Black Jack."
ha ha
they didn't want to get reported to HR for using a lower-case b on the b word
Did you hear about the WaPo reader who heard that "Orange is the New Black" and so he voted for Trump?
Tips are charity and they ought to be exempt.
True Rocco. I don't even know if the sub-minimum wage category exists now. I recall recent news about Biden moving to eliminate it even though that is what allows Goodwill to pay handicapped people to work in their facilities.
No mention of strippers? It may be illegal now but strippers used to have to pay stage fees. This compensated the club for their use of the stage to earn money in tips.
The argument was that they not only were not club "employees" but were not even "independent contractors" to the club. I guess, technically, they were independent contractors to thecustomers tipping them.
That is now illegal in at least some states. Not sure there is a federal law against it.
Strippers were apparently unhappy about paying these stage fees.
John Henry
Ann Althouse
So this really shows that the proposal is about winning Nevada.
It's bigger than Nevada. Restaurants suck after COVID. The industry hasn't recovered fully. Like many other industries, they can't find people to work, so the service sucks, the prices from the Biden/Harris inflation are ridiculous. $16 to $18 for a burger?
Not only should tips be tax free, we should return to 100% deduction for business entertainment. In it's prime, the rotating restaurant atop the Milwaukee Hyatt on 3rd and Kilbourne was great. But it was fueled by the old 100% deduction. Now it's just and empty donut on top of the building.
The biggest issue with tax avoidance is that eventually they’ll reach social security age
— it’s the single mother who is trying to makes ends meet for her and her kids by waiting on tables at the little Italian eatery the wife and I sometimes walk to.
It's like the opening scene in "Reservoir Dogs" when Mr. Pink refused to tip. The other crooks lectured him that waitressing was a respectable profession for mothers trying to get by.
Trump proposed it first. Harris is copying it because it a good tax break idea for the lower middle class.
Trump has also proposed increasing the business entertainment tax deduction. That would stimulate the entire industry and it's workers. Quality and service would improve.
The waiter or waitress that gets the table of five or six, out for a business lunch or dinner knows they just scored. I think the business entertainment deduction is now 50%. Should be 100%. The check is going to be big, and so is the tip.
The Brookfield Mall campus in Brookfield, WI is dead as a doornail on weekends. But on weekdays the restaurants like Coopers Hawk are packed with business lunches and early dinners. It's the only thing keeping that campus alive. Barnes and Noble and The Gap don't pull people in anymore.
Some high end restaurants used to charge waiters to work there.
Valet parking started in the 60s with individuals hustling for tips. Venues started to charge them to hustle on premises the it br ame a business with Valet concessions renting for big bucks
John Henry
Rusty, the NPR article on this topic said not taxing tips would cost the feds 100 Billion over 10 years.
Must be a LOT of blackjack dealers.
John Henry wrote, "Strippers were apparently unhappy about paying these stage fees." They switched to the Kamala Harris method of compensating their bosses, of which they were already familiar.
Fred Drinkwater
"Rusty, the NPR article on this topic said not taxing tips would cost the feds 100 Billion over 10 years."
The best information I can find on this is, "The IRS said that $20 billion in tips were reported in 2008 and that amount nearly doubled to $38 billion in 2018. That's reported income, not tax revenue.
Considering the fact that 37% of those reporting tip income fell below the level that requires a tax payment, and the difficulty in recording tip income, and I'd say that yes, the total tax collected barely equals the costs to collect it.
NPR, as usual, is full of it.
Althouse, have you made any effort to identify the problem with Blogger comments switching back and forth from regular view to threaded view? This is not a question about spam folders and missing comments.
The biggest problem for me is that I lose the preview function. This prevents me from testing links, which puts me in the position of possibly posting a dangerous link. Plus the additional typos.
I can't find any reference online about the issue and Blogger help seems to have shut down years ago.
In California, we actually have a lower minimum wage for people in jobs that are traditionally expected to receive tips. The problem with tipping is that the tipping culture has gotten out of control and now almost everyone expects to to get tipped and tipped big. When I was growing up the rule was 0% for terrible service, 10% for OK service and 15% for great service. Now people get bent if they don't get tipped 20% or more. Many places actually place the minimum default tip on the payment pad as 25%. I've even heard of web sites asking for tips.
Plus, if someone posts a reply, I may miss it if I go straight to the newer stuff.
let everyone be called Mr Tips - no more W-2
report as much as you want to contribute to SS and Medicare
My understanding is that no law has defined what is 'income'
Speaking only for bars and restaurants, a lot depends on the establishment, the clientele, and rules/policies re. Sharing and pooling. A lot depends on the employee’s skill and attitude. Some servers make $60/shift, others go home with $3 or $400.
Tipped people who figure out what’s going on realize they are a personal business. No rent, no equipment to buy and maintain. No utilities No insurance. No inventory. NO NUTHIN’!!! Just work your ass off to make your customers glad they sat at your table.
I know someone (upscale casual dining)who tends bar and makes $250 - $400 a night in tips plus her pay plus amount servers share with her. If I recall, her tip income is taxed at 8 percent of credit card sales so when all is said and done the IRs is only after about a third of her income. Making another $60K tax free would be nice but…
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