Why it matters: Typically, ideas like these are tough to turn into reality, but next year when the Trump tax cuts expire, Congress will likely pass some kind of new tax bill.
- That creates an opportunity to put new policies in place, says Brendan Duke of the Center for American Progress Action Fund.
The intrigue: Where things start to get wild is outside the restaurant industry, as Americans try to figure out ways to classify more of their income as tips. Think bankers’ bonuses or sales commissions — or even pay for a Substack writer or freelance podcaster.
- The U.S. tax code already has different rules for different kinds of income — capital gains, for example, are taxed at a lower rate than payroll income.
- When those kinds of divides happen, you create enormous incentives for people to game the system, says Howard Gleckman, a senior fellow at the Tax Policy Center.
- Those kinds of shenanigans typically happen with higher earners — think of the carried interest tax loophole, for example.
For the record: An official from the Harris campaign said the policy would include “strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways to try to take advantage of the policy.”
- Trump’s campaign hasn’t offered much in the way of detail.
I think this policy is a mistake. I think the US should be moving away with tipping, and this will just make it harder. European restaurants work this way and don’t seem to be suffering.
I hate having to judge a waitress, barber, or driver after receiving service then doing math on the bill. Worse yet is housekeeping at a hotel; you’re expected to leave them a tip when you don’t even know what kind of job they’re going to do. Just charge me on the bill whatever it costs to pay these people fairly and stop making me make up the difference.
European restaurants work this way and don’t seem to be suffering.
I was in London a couple months ago for my first trip to Europe. I’m still trying to figure out the economics of the pubs.
How are the servers at pubs being paid in a manner that they’re able to live in or close to London? Aren’t they paying significantly more in taxes than US workers? They all seemed very pleasant and gracious, presumably with the promise of a known paycheck. They really didn’t have much to do other than pull a tap handle. The beers were all very reasonably priced (often 10-25% less than at American bars). I wonder if these pubs are subsidized in some way to keep the prices low and the wages reasonable. How are businesses taxed in London / Europe compared to the US? Perhaps higher wage taxes and lower business taxes means employers can pay their staff more?
The experience is still living in my head as if I had visited a land in a fairytale (or could just be because London).
My point really is that local economics would likely change drastically simply by making this one change. I know a lot of bartenders and servers - they make far more on tips than if they were paid a living wage. I don’t know one person who would prefer an hourly wage. There’s so many pieces to the puzzle that I’m not able to jot down right now but I wonder if the US could maintain the number of restaurants and bars it has if it were to shift servers to a salary.
They should make this tax free because the current system criminalizes normal behavior. There’s a huge amount of tax fraud, yet not worth much in the grand scheme of things and not worth enforcement. This just means they are no longer criminals and the honest people are no longer punished for honesty in something where they realism can’t get caught.
As someone who lives in the EU and travels to different EU (and the UK) countries, tipping is becoming a thing here.
Was just in Scotland, one place had mandatory 10% tip on the bill, another place “questioned” (complained) that the tip wasn’t high enough for them. I’ve also seen it in other countries, typically on the machines to pay. I think it’s because it’s easy to put there and people are more likely to hit a yes option.
Isn’t as high % expected as in the US and Canada, but it’s showing up here.
In general I don’t usually tip because of this. It’s not my place to pay them a living wage; it’s the employer’s job. If more Americans would take this stance and make it impossible for employers to hire at sub-minimum wages; this culture would go away.
I have to receive more than above-and-beyond service to even consider tipping; and then it’s only when I have the funds to do so. I don’t appreciate tipping pressure either; and I will actively not tip when people are pressuring me to do so; or when the execution of the transaction itself needlessly provides a prompt to tip when there’s really no reason to tip anyone who doesn’t care or provide more than their basic job in service.
Frequently there’s no reason to tip in most service contexts; as there’s no additional work being done; or assistance being asked of the employee. In some limited contexts there’s justification for tipping; but it’s very limited justification, and it really comes down to a couple questions: ‘Did the employee provide a service that was far more exceptional than would be reasonably expected of them to perform’, and, ‘Was that performance given merely because it was asked or needed to accommodate you as a customer and your immediate and obvious needs’?
In some contexts, in some jobs, those opportunities to go above and beyond do exist. In those contexts…tip if you feel it’s appropriate. In many other service jobs; the employer has brutally optimized and taken complete management over the efficiency and tasks being performed and; as such; they should assume the responsibilities of ensuring that an employee gets paid sufficiently, but also gets opportunity to get paid for reliable, superb or consistent superior performance.
What sucks is your act of defiance only screws over the worker.
The employer got paid no matter what.
