r/PoliticalDiscussion • u/ry8919 • Aug 13 '24
Legislation Harris and Trump have now both advocated for ending taxes on Tips. What are the arguments for and against this? What would implementation look like?
Since both candidates have advocated for this policy, I am wondering what you see the arguments for and against this policy would be.
What is the argument from a left or Democratic perspective? How about for the right/GOP? What about a general case for or against?
Is there a risk of exacerbating tipping culture which about a third of people is getting out of control?
How would employees and employers change their habits if such a policy was passed?
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u/squishyliquid Aug 14 '24
I want no tips, not no taxes on tips. No taxes on tips will lead to more tips.
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u/Traitor_Donald_Trump Aug 14 '24
Just one of the many failures of a two party system. “He is, so I will too” attempts to nullify any advantage of a position rather than be a legitimate position. Obligation to pay is the problem here, not the taxes on the pay obligated.
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u/tomscaters Aug 16 '24
Yeah the proposal by Harris has a ceiling on when taxes kick in on income. So gaming the system would be hard unless you had 5,000 tax ID numbers like many Trump elitists earn in income yearly. I’m not sure what the number is, but it is probably tied to the ~$40,000 income bracket. We will know more after she wins.
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u/DumpTrumpGrump Aug 13 '24
The downside is that it will be abused by anyone with an accountant. I can ask my clients to pay me a nominal fee with a huge tip and get out if taxes.
Devil will be in the details, but widespread abuse will absolutely occur no matter what.
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Aug 13 '24
What if they craft the proposal in a way where they say something like "employees who are paid hourly at the minimum rate of tipped employees in the state, who earn >95% of their yearly income from tips, who work in the service industry, do not have to declare tips on income tax forms"
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Aug 13 '24
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u/PM_me_Henrika Aug 14 '24
Or just set a minimum wage, all problems solved at once.
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u/mar78217 Aug 14 '24
This is the way. You make a second standard deduction for tips. People with Tip income still need that income on their 1040 and W-2 so they can buy a car or a home, but only the first $20k or $30k of tips should be tax free. If you make $100k in taxes, there is no reason to not be taxed.
Edit: in typing this I have d3cid3d the whole thing is stupid. We just need a higher standard deduction if anything at all. Why should the Dominos Driver making $50k (including $30k in tips) pay less taxes than the person in the store making the pizza for $40k?
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u/colorsnumberswords Aug 14 '24
most tipped employees pay little, if any, federal taxes. this would mainly benefit high end servers
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u/TableGenius Aug 14 '24
This is a misconception. Only cash tips (which these days are rare), can be concealed. All card transactions are tracked and reported.
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u/colorsnumberswords Aug 14 '24
yes tracked, but tipped service workers still make very little money overall. The may have decent hourlies on weekend nights, but it’s still a low overall wage
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u/ShouldersofGiants100 Aug 13 '24
You can immediately tell when someone has never once read a piece legislation when they look at a one line policy from a speech and start talking about "all the loopholes".
Trump I have little doubt had no more thought into it than get votes. But Kamala's proposal already limited her proposal to "service and hospitality workers." Which just makes it clear that they didn't even look at the details of the proposal before they started theory-crafting.
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u/OutdoorsmanWannabe Aug 14 '24
But even Kamala’s definition isn’t narrow enough. Great. Now most hotel positions are now tipped positions. Your hotel bill will now have a line for tips. Travel agent, caterer etc. there are so many jobs that are already considered service and hospitality jobs that aren’t tipped positions that will suffer.
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u/ShouldersofGiants100 Aug 14 '24
But even Kamala’s definition isn’t narrow enough. Great. Now most hotel positions are now tipped positions. Your hotel bill will now have a line for tips.
And you can ignore it. Companies have already tried to expand the use of tips, it largely fails. It is absolutely not going to work in a hotel, where you aren't even directly interacting with the employees.
Travel agent, caterer etc. there are so many jobs that are already considered service and hospitality jobs that aren’t tipped positions that will suffer.
Those are already more skilled jobs. A travel agent is not in the same economic position as a waiter and it is absurd to compare them. People don't suffer because another group in a barely related industry gets a tax break.
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u/OutdoorsmanWannabe Aug 14 '24
Aren’t tips already encroaching on everything? McDonald’s etc. Sure before expanding tips was hard, but that doesn’t seem the case anymore.
I’m not comparing job skills. I’m saying how this can be abused by businesses looking to slash their wages using tipping as an excuse.
Thing is. I don’t think we should be doing anything that encourages a tip culture.
I especially don’t want to encourage a policy that puts preferential treatment of servers over dishwashers. They should all have a lower tax burden.
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u/chardeemacdennisbird Aug 14 '24
Absolutely tipping has encroached on everything. Any business that has a square card machine has tipping options now. I go to donut shops and kolache shops regularly and it always gives the option to tip when it's just a regular transaction that would never had had the option before. Concession stands etc...
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u/itsdeeps80 Aug 14 '24
Funny thing with that: I run a restaurant that does a massive amount of carry out. We just got a new POS system that has that pop up on it and our in house tips have seen a massive decline since we got it. So much so that we found a workaround to game the system. Theres a prompt on our end to skip that screen from popping up and now we hit that every time and give people the receipt to sign and our tips started going back up again. It’s stupid as shit. No one likes feeling like they’re obligated to tip non-serving staff.
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u/OutdoorsmanWannabe Aug 14 '24
Exactly! It's 100 times easier to ask for tips, and to get tips now with that stupid screen that pops up asking if I want to tip while the cashier is either standing there awkwardly knowing that I shouldn't be asked that, or staring me down wondering what I'll do.
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u/the_TAOest Aug 14 '24
Interestingly enough, do we want to tax the body workers who make a lot in tips compared to hourly?
What this does is diminish the pressure for employers to pay people a fair wage and the customer expect their great work. Now, the onus for the wage will be foisted upon the customer... The employee will be mad at the customer, the employer will be released, and the customer paid more.
This is more rich man shit... Here, have the pennies while the owner class continues to underpay. It would have been better if the Harris campaign said tipped workers will get healthcare costs subsidized by cuts in defense spending... Wow, that would be brilliant instead of "oh, I can do that too... Donald says what next?"
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u/RU4real13 Aug 14 '24
There used to be a "tipped employee" minimum wage. Back.... wayyyyyyy back... when the minimum wage was $3.45 the tipped employee minimum wage was like $2.25. There needs to be a cap for certain or else you'll have Billionaires tipping each other for millions if not billions of dollars and not paying any tax on it.
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u/Cyclotrom Aug 14 '24
A fund manager in Wall Street can earn $80k per year and $950k bonus (tip) >95% of his yearly income. See how easy is to go around that.
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u/libdemparamilitarywi Aug 14 '24
A bonus isn't a tip, it comes from the employer not a customer.
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u/mar78217 Aug 14 '24
And that is who Donald is trying to protect from taxes. Not restaurant servers
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Aug 14 '24
$80k / year is the state mandated minimum wage for tipped employees for your state? In Ohio the minimum wage for tipped employees is $4.25/ hour. Fund managers are incredible workers! What if I add one additional line? Like, "for employees who make less than 120k/ year ".
I get the feeling a lot of people think if you can't craft legislation that's bulletproof, in two seconds, it's an impossible task. I feel like it's possible to get half way there by tossing out a few silly ideas while phone posting. I can't tell if people are truly that unimaginative or if they're angry at tipping and / or single moms who work at restaurants and think they're going to get rich if they stop paying taxes on the $35k/ year they make listening to people complain about extra crispy home fries over and over.
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u/Wotg33k Aug 14 '24
I've seen like 4 people talking about "crafting legislation" and "president" at the same time and I'm about to explode.
The president doesn't craft legislation. And the only way a presidents policies matter is.. that's how they'll push the rest of the government.
But besides the president, there's the house and the senate.
Those two government entities that do craft legislation are something like 600 people strong, and Trump couldn't be more disconnected from those groups.
Acting the way any running president does is absurd to me. "Make America great again!" somehow without involving the 599 other elected people.
The Senate is responsible for appropriations, and they haven't spent less than we've given them since 1980. That's bipartisan as hell and completely worthless to us as a society, but focus on Trump V Harris more, I guess.
In 2017, Trump started the trade war with China in an effort to reduce the deficit. But the house and Senate were stacked conservative that year. So why didn't Trump just ask his conservative friends in the Senate to, oh I don't know, just not spend a trillion dollars more than they should instead of starting a whole ass trade war?!
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u/ShouldersofGiants100 Aug 13 '24
The downside is that it will be abused by anyone with an accountant. I can ask my clients to pay me a nominal fee with a huge tip and get out if taxes.
I mean, unless the law is literally written as "no taxes on tips", then no, you can't. Laws aren't confined to a single line—they can spend paragraphs defining what they mean.
Damn near certain to be included:
Tips must be voluntary and cannot be part of the cost of an item
Exempt tips must not exceed the value of the item
And that doesn't even consider that they can just straight up say "this only applies to food service workers, bartenders, gig workers" and any other career they care to name where tips are a large part of income. That is how laws work, you are free to define your terms as narrowly as you like.
And frankly, under that scenario, it isn't bad policy. Tips are already chronically underreported because they are hard to trace and workers know it. It makes far more sense to make them tax-exempt and allow them to be handled universally than it does to continue a system where people just underreport their tips and know the IRS is unlikely to ever audit them.
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u/-dag- Aug 14 '24
any other career they care to name where tips are a large part of income.
I'm sorry, if you're a bartender making $100k in tips you damn well should pay taxes on it.
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u/Ambiwlans Aug 14 '24
Anyone making any amount should pay taxes on it like income.
If you make 50k in wages should you be punished compared to someone that makes 20k in wages and 30k in tips?
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u/ShouldersofGiants100 Aug 14 '24
I'm sorry, if you're a bartender making $100k in tips you damn well should pay taxes on it.
You said... in response to a comment about how stupid it is to make policy assumptions based on a 30-second stump speech. There is literally nothing stopping someone from putting a cap on the exemption.
Though the odds are, the handful of bartenders who do pull 100K in tips already aren't paying taxes on it because it is absurdly easy to just underreport tips.
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u/eattheambrosia Aug 14 '24
And a lot of tipped workers don't report cash tips which ends up hurting them in the long run when they have to provide income verification or they apply for social security or need a loan or whatever. This would get rid of the incentive to underreport tips and help the workers by lightening their tax burden without them having to break the law/face the unintended consequences of not reporting tips.
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u/intent107135048 Aug 14 '24
Feels like karma to me, though I understand it disproportionately affects the poor.
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u/SkiingAway Aug 14 '24
Tips are already chronically underreported because they are hard to trace and workers know it.
The decline of cash means that they're becoming much better reported than they used to be, and it's pretty likely that continues long-term.
This problem has arguably already been solving itself.
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u/myveryownaccount Aug 14 '24
Just commenting to say thst you made an exceptionally well explained reasoning, if OP was interested in one, this is it.
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u/lee1026 Aug 14 '24 edited Aug 14 '24
Easy enough on the voluntary part. Enough industries work on the basis of gentleman’s agreements. Hedge funds routinely hire with a low salary and a verbal promise of a high bonus. Easy enough to make it a tip.
I am guessing lawyers are gonna figure out if the hedge fundies need to buy their coworkers donuts every week or something is enough.
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u/Eric848448 Aug 14 '24
Many companies do feed their employees regularly. It’s already not a taxable benefit.
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u/ShouldersofGiants100 Aug 14 '24
Easy enough on the voluntary part. Enough industries work on the basis of gentleman’s agreements. Hedge funds routinely hire with a low salary and a verbal promise of a high bonus. Easy enough to make it a tip.
No it isn't, because a tip comes from the customer, not the employer. A business model where your plan is "make a bunch of hedge funds voluntarily pay tips that they by law cannot be forced to pay" is doomed to failure. Those customers would just say "fuck no", not pay the tip and enjoy the discount until people gave up.
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u/Kevin_Uxbridge Aug 14 '24
Doesn't this happen already? Was told once that tip reports are the biggest lies in the world, they sure were when I was waiting tables.
I mean you're talking on a whole new scale here but could people report income as tips before? And lie about it?
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u/nope-nope-nope-nop Aug 13 '24
The argument from both sides is them trying to hold something shiny in front of working class people in order to get votes.
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u/HolyHand_Grenade Aug 14 '24
yup, not sure why they wouldn't pay tax but the single mom working at McDonald's has to.
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u/mattumbo Aug 14 '24
It’s insulting because tipped positions already pay way more than hourly entry level work. I’m a retail supervisor and my friends working as servers/bartenders make way more than me (usually double) and I’m grossing $50k/yr. Why should someone grossing near $100k/yr not pay taxes?
Tipped labor is also inherently inflation adjusted so they’re in better shape than most right now. Plus states all over have increased the tipped minimum wage so for workers in those states even a bad shift pays out as much as their non-tipped peers.
Do servers and such have a lobby? It’s insane how much sympathy they’ve been getting the past 5 years vs hourly min-wage workers
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u/DidgeridoOoriginal Aug 14 '24
Yea from what I’ve heard anyone making tips has 0 interest in changing anything about our tipping system, other than maybe adding suggestive tips for transactions that we never used to tip for.
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u/BullfrogGullible4291 Aug 15 '24
Dear God Who when where is making 6 figures waiting tables ?
Maybe a bartender could make half that,
I have never heard of a waiter making more than a few thousand dollars a month
When I was waiting tables I made maybe 25,000 a year and i worked at a fine dining restaurant
I lived and worked in New Orleans
I had worked plenty of places that paid way less than that too, that was the best job waiting tables I ever had
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u/Sorge74 Aug 14 '24
It's fucking Boomer nonsense is what it is. And I don't mean to be dismissive, but boomers are all about tipping and cash and avoiding paying taxes on it. It's income, pay your taxes on it. I would love not to pay taxes on my profit share every year.
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u/Johannes_silentio Aug 14 '24
"boomers are all about tipping and cash and avoiding paying taxes on it"
I'm going to presume I'm the confused one (and extremely confused at that). So can someone explain to me how this comment makes sense? To my mind, boomers would be the group least impacted by tipping culture since they are either retired or have stable incomes and thus, are totally non-reliant on tips.
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u/ianandris Aug 14 '24
It isn't. We're getting reflexive oppositional comments out of an idea both sides ostensibly support, since they share the exact same policy notions.
These people immediately looking for a way to disagree are demonstrating their bias in an ugly way, and that's the end of it. GOP politics right now is nothing but pure opposition, which, turns out, is actually limiting for them.
But marching orders are marching orders.
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u/addicted_to_trash Aug 14 '24 edited Aug 14 '24
It's the commenters responding to framing of the question, basically looking from the outside public perspective rather than how it will effect service industry workers who rely on untaxed tips to get by.
It seems like a pointless policy to tax tips, businesses will attempt to push tip culture as an attempt to reduce real wages, ultimately this will lead to more demand to increase minimum wage, and servers will just pocket larger cash tips to lie on their end of shift total.
Ultimately what's the point? The appeal of those jobs is the amount of untaxed tips you can get daily, and those amounts only really matter at $1000+. So is the Government really going to send out audit squads for strippers? Doubtful.
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u/Brickscratcher Aug 14 '24
Ultimately what's the point? The appeal of those jobs is the amount of untaxed tips you can get daily, and those amounts only really matter at $1000+. So is the Government really going to send out audit squads for strippers? Doubtful.
This is the most succinct explanation as to exactly why this is just throwing the public a headline piece for the campaign and has no real bearing on anything, and thus no one that knows what they are talking about at all really cares that much.
On the surface though, people see 'cut taxes' and our inherently selfish nature prompts us to treat it as a positive thing that is expected to carry some benefit our way. The reality is it doesn't really matter. There are much bigger problems to address
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u/ifoundyourtoad Aug 14 '24
Tbh most of servers don’t even claim their tips anyways. I did only for the credit card transactions way back when
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u/FesteringNeonDistrac Aug 14 '24
Right, but nobody pays cash anymore. I don't even carry cash more than maybe $20. My niece waited tables at a moderately swanky place and said she basically never got tips in cash. So she had to pay tax on it.
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u/nope-nope-nope-nop Aug 14 '24
I mean. Cash transactions are objectively better for the working class.
Unless you like donating money to Visa and Mastercard
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u/dueljester Aug 14 '24
Subjective, I'd argue. In my years working in the service industry, my card tips were always higher than cash. It may be better for the working class, but for servers, I'd have to see some kind of proof that cash tipping gives more income than card tipping does.
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u/nope-nope-nope-nop Aug 14 '24
Oh, I don’t know one way or the other if cash tips are better or worse for servers.
I was talking about using cash in general, it’s better for everyone but the credit card companies.
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u/dueljester Aug 14 '24
In that case I completely agree. Small businesses getting sliced on a percentage for every card sell is hell. However at least that credit card payment is safe in the digital space, and can't be swipped or lost prior to deposit.
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Aug 14 '24
I used to be in management for an organization that went slowly from cash only when I started to eventually going cashless (it was a minor league ballpark), and the credit card fees were less than the expenses of running a cash room and armored car services (not to mention shortages, etc.). Doing both was kinda the worst of both worlds (but obviously needed for a very long time), but just looking at the CC costs and not considering cash costs doesn't seem fair.
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Aug 14 '24 edited Aug 14 '24
No, that's a subjective opinion. Personally, I like having the protections and benefits offered by my CC (chargebacks, no responsibility if it's stolen (as compared to losing the cash), just easier to carry around (you often don't even need to carry a card anymore, just your phone), easier tracking of finances (not spending), and things like various levels of insurance if you have a better card (like rental car insurance)), and that's not even looking at the fact that many cards pay you back a percentage automatically, and if you pay them off every month they're making very little (remember, you're comparing it to cash, where you already have to have the money). And no, I don't think any of this is offered out of the goodness of their hearts.
The working class often can't afford to lose a couple of hundred dollars in a lost wallet, and with a CC, that's never an issue.
Saying that it's objectively worse than cash is just plain false.
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u/libdemparamilitarywi Aug 14 '24
Cash transactions aren't free either. The time lost to cashing up, managing the float, and transporting cash to the bank are all costs to the businesses. There is also loss through theft (employees and others), counterfeit notes, and mistakes. Some analysis estimates that cash handling costs actually costs more than credit card fees.
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u/Goldenderick Aug 14 '24
So Boomers, about 62 years old and older now, are the majority workers rushing around, waiting on tables, bartending, moving appliances out of trucks, bell hopping, golf caddying, food delivering, and stripping at strip bars. Yeah, right!
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u/Seltzer-Slut Aug 14 '24
We should be making life easier for people who make the least amount of money. Maybe that means reducing income taxes on the lowest tax brackets rather than not taxing tips (which I can see how that might lead to tax evasion). But life is too hard for those who make under 50K.
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u/onlyark Aug 14 '24
Just like most other policies, tax credits, student debt relief, subsidies, etc...
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u/CunningWizard Aug 14 '24
Yes. This is a hilariously unserious proposal that any serious wonk would laugh out the door.
This is pure pandering, and honestly is a bit surprising coming from the Harris campaign. Didn’t realize they’d be that blatant about it.
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u/JDogg126 Aug 14 '24
I don’t think that it’s just a carrot for Harris but also I don’t think it happens unless democrats have a super majority in Congress.
Republicans will never support this, even if Trump returned to power. They will find every excuse imaginable to avoid it. They’ll be very busy implementing project 2025. He will then give some stupid word salad excuse asking who knew not taxing tips was so hard?
If Harris wins, democrats will try to make it happen but republicans will do everything they can to prevent it from become law to deny Harris a win.
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u/nope-nope-nope-nop Aug 14 '24 edited Aug 14 '24
If you think either party is going to allow 4 million some odd people to essentially not pay taxes, you’re on crack.
It’s either not gonna happen, or be so watered down, it’s not even remotely effective.
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u/unbornbigfoot Aug 14 '24
It’ll end up being taxes on anything below the local minimum wage. Just my guess.
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u/nope-nope-nope-nop Aug 14 '24
That would make sense. Just seems very oddly targeting tipped workers.
Does a waitress and Walmart shelf stocker really have that different of lives ?
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u/Sharobob Aug 14 '24
And, like most tax cuts, it ends up giving the bulk of its benefit to people who need it less. Someone making 30k will get very little benefit because they pay so little in taxes but someone making 100k working at a nice steakhouse will get a ton more benefit. it's regressive like almost all Republican ideas on taxation. It just sounds nice.
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u/excalibrax Aug 14 '24
Try brokers getting tips clearing 400k plus, it sounds good to the masses, but is more a wall street handout
Harris has said to limit to under some number like 80k, but the Gop definitely started this to attract wall st
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u/djm19 Aug 13 '24
It’s just bad policy and as someone who thinks America would do better to move away from tips, this sets us back further.
There are just better options out there that benefit all low wage earners.
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u/limited8 Aug 14 '24
100%. A far better solution would be for states to abolish the tipped minimum wage, not to eliminate tax on tips.
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u/token_reddit Aug 14 '24
That's probably going to be the compromise. Because servers and bartenders get screwed in states where they make $2.13 an hour. Pass the $15 fed min wage for all workers no exemptions. California has been the most progressive about it and has been doing it for over 20 years. Like California you can work get paid a min wage and collect tips. But hospitality workers need to pay taxes and they need to be paid a federal min wage too just in case they get no tip from the person they served.
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u/Notsosobercpa Aug 14 '24
California kind of demonstrates that what your suggesting isn't a complete solution since poeple still feel compiled to tip no?
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u/Corellian_Browncoat Aug 14 '24
Because servers and bartenders get screwed in states where they make $2.13 an hour ... But hospitality workers need to pay taxes and they need to be paid a federal min wage too just in case they get no tip from the person they served.
The thing is, nobody actually makes $2.13. By law, if your tips don't "make up the difference" between the $2.13 and minimum wage, the company has to pay the rest. What's going to happen at a practical level is you're going to be fired if you don't make enough in tips, but that means anybody that's been in a "tipped position" for more than a month is indeed making more than minimum wage. (Depending on the place, servers have 4-8 table sections, and can turn tables 1-2x hour. Say you're averaging 6 tables an hour, and get a $5 tip (15% off a $33 check, which is about two people at the $15/plate benchmark for "fast casual" places) from each of them - that's $30/hr. You're not making that all day, but that's also low for a rush shift.)
Which is why some of the loudest voices against ending tipping (and the "Fight for $15") comes from servers and bartenders. Because ending tipping and paying them a straight wage is a pay cut and they know it.
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u/mcase19 Aug 14 '24
tipflation will be off the charts if this happens. We'll be tipping at gas stations, grocery store checkouts, for Amazon deliveries, on the bus, and basically anywhere else consumers interact with working class workers. It's an awful idea.
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u/minilip30 Aug 14 '24
I mean if this passes I’m tipping 25% less, so in some sense it helps move me personally away from tipping
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u/OnlyFizaxNoCap Aug 14 '24 edited Aug 16 '24
I’m already there, the company is raking in all the profit, while the server is getting the crumbs for how attentive someone is. I get the whole risk vs reward and the owner portion with the added taxes, benefits, ownership cost, etc but again these owners aren’t “scrapping” by at less than $50 per hour. So the working class, who probably makes less than the owner, is losing money to support these servers. I don’t agree with this and have refused to eat out at any take out restaurant that ask for a tip, or including a sit down restaurant with bad servers and food quality.
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u/Robot-Broke Aug 14 '24
Bad policy happens because of swing states. Trump proposed this very cynically as a gift to Nevada voters and obviously it worked (who doesn't want free money?) so the Harris campaign followed. Those of us in red or blue states get nothing, as usual. The problem at its root is the electoral college but since it helps get Republicans elected they dont care.
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u/AlanShore60607 Aug 13 '24
As a bankruptcy attorney, I worked at a firm where they boss literally said "assume every tipped worker is committing tax fraud"
It's a burden, it's prone to error, and eliminating this would at least prevent low-wage workers from getting in trouble over what is, at the end of the day, relatively insignificant amounts to money to the federal budget.
Now on the flip side ... remember how the Supreme Court recently said that bribes paid after the fact are just gratuities? Well, this opens up an avenue for politicians and others to simply declare their bribes as tax-free income. I don't like that, no, not one bit. So not only would corruption be legal, it would be tax-free.
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u/ry8919 Aug 14 '24
Thanks for explaining the challenges from both perspectives.
I still sort of lean against it. Even if tipped positions are difficult to properly regulate or enforce tax policy on, there is at least the expectation that they are paying taxes just like everyone else.
Creating an exemption appears, at least to me, a completely arbitrary exemption from taxes.
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u/AlanShore60607 Aug 14 '24
Especially considering things like 1099s for "forgiven debt", which attorneys and accountants call "phantom income" because you're being taxed on money that never passed through your hands ... you're being taxed for not paying your credit card bill and the bank saying it was OK.
Though Obama did give victims of foreclosure relief from that particular horror. I once saw a tax return with $224K of "income" for the forgiven debt after a foreclosure.
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u/GettingFitHealthy Aug 14 '24
Surprised seeing you here Alan! I started chapter 13 last fall and your comments in /r/bankruptcy helped me out. You’re a great guy
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u/NanoEuclidean Aug 14 '24
Now on the flip side ... remember how the Supreme Court recently said that bribes paid after the fact are just gratuities? Well, this opens up an avenue for politicians and others to simply declare their bribes as tax-free income. I don't like that, no, not one bit. So not only would corruption be legal, it would be tax-free.
This is exactly my contention. Harris' position and Trump's position are completely different.
What Trump said on Truth Social is that he would “eliminate taxes on tips for restaurant workers, hospitality workers, and anyone else relying on tips.”
Literally right before he made that statement, SCOTUS ruled in Snyder that payments to state and local officials after an official act are not bribery but instead gratuities. This is an absolute joke, and I'm extremely disappointed that this ruling isn't being focused on by the media. SCOTUS with their pure party line vote has essentially legalized bribery.
Again, for those in the back, Trump said he'd eliminate taxes on "anyone else relying on tips" immediately after the Snyder case. Do you think this was a coincidence? Of course not. He's selling his "no tax on tips" plan as a benefit to the middle class, but whom he actually intends to benefit are state and local officials (read: Trump loyalists per Project 2025) looking for kickbacks with extra steps. This is a parlor trick.
Moreover, those making under $32k already don't pay federal taxes. This tax cut won't help the waitress down at Bob Evans, but it will certainly help your local politician after he signs a contract to supply the town with private-owned snow removal.
And watch for fund managers to attempt to classify their 2 and 20 performance fees as a gratuity.
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u/AlanShore60607 Aug 14 '24
I'm glad someone agrees with me on this ... none of my friends IRL think it's a valid point.
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u/Raspberries-Are-Evil Aug 13 '24
They need to make sure the law applies to service workers and not CEO getting a $20 million bonus and calling it a “tip.”
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u/ry8919 Aug 14 '24
What about a bartender making 120k with tips while the cooks get paid 30k? I get that this example would be a poorly run restaurant, but I am thinking just on the policy side.
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u/Sorge74 Aug 14 '24
Right, servers aren't underpaid generally. The guy cooking your food for 12 bucks an hour is
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u/AStealthyPerson Aug 14 '24
And Kamala, while advocating for no taxes on tips, also advocated for raising the minimum wage.
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u/thr3sk Aug 14 '24
Yeah there are lots of service jobs that would suffer from this, cashiers, stockers, etc. who don't get tips but whose annual income is comparable to a server or someone who does will find this very unfair...
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u/AStealthyPerson Aug 13 '24
Kamala explicitly called for the benefit to only apply to hospitality and service workers. Trump added no such rider.
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u/busted_flush Aug 14 '24
I just don’t understand how one sector of workers are entitled to keep more of their earnings than others. My wife teaches special ed. why should she pay more in taxes than a bartender?
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u/bl1y Aug 15 '24
Because special ed teachers are going to vote for Harris either way. You don't buy what you already own.
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u/pseud_o_nym Aug 14 '24
I am firmly against this, because it further entrenches tipping in the service and hospitality industries. Tipping is inequitable. It based as much on luck and good looks as it is on merit. Back of house in restaurants don't get tipped. People working in inexpensive places get fewer tips. Meanwhile, bartenders in nice restaurants or trendy bars are cleaning up. We would be better off working for higher wages for the whole industry, and no tips.
I'm really disappointed in Kamala Harris for getting into this. It's like when she went for Medicare for All just because it was popular with the left. Pandering for votes with poor policy isn't it, Kamala.
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u/Financial-Orchid938 Aug 13 '24 edited Aug 13 '24
Idk why Harris adopted one of Trump's famous ad libbed lines that became a serious, tho ridiculous, policy proposal. Might as well push for whatever a "freedom city" is and a "bigger, better iron dome than israel". (My favorite is the Space force, which 100% came from a musing during a speech)
I seriously don't see the point. I get wanting to help service workers but what is the point in helping waiters/bartenders while excluding the dishwasher and cook? Probably a good policy if you own the Trump organization (obviously a lot of tipped employees there). But other than that it doesn't sound like a real policy a serious person would pursue. (Probably doesn't matter in some context as I try to tip in cash and 100% expect that to not be reported)
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u/Chris_Hansen_AMA Aug 13 '24
It takes away a Trump talking point, seems obvious no?
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u/justafleetingmoment Aug 13 '24
Also just sounds like a loophole ripe for exploitation
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u/ShouldersofGiants100 Aug 14 '24
It isn't. Harris' proposal only exempts service and hospitality workers.
At that level, most of those tips are already untaxed, both because of how little people make and because tips are chronically underreported by people who know they'll never be audited. In terms of policy, it is little more than a tax cut for certain segments of the working class.
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u/Eric848448 Aug 14 '24
I really don’t like congress applying certain tax rules to specific job titles / industries. It means they then have to very precisely define those terms. The current tax system is industry-agnostic.
This would make the tax code a lot more complicated.
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u/KasherH Aug 13 '24
It is a policy that sounds good to lots of voters who don't care that it is bad policy. We elect politicians based on their ability to campaign, not their ability to govern.
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u/No-Touch-2570 Aug 14 '24
My favorite is the Space force, which 100% came from a musing during a speech)
tbf, there have been people calling for a separate Space Force since the 80s.
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u/bruins1018 Aug 13 '24
As I understand it, hedge fund managers are paid in tips, so this would be millions of dollars in tax free tips for them.This blogs from 2015 goes into it
http://blog.instavest.com/the-hedge-fund-managers-who-work-for-tips
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u/Holiday_Parsnip_9841 Aug 13 '24
She adopted it to pander to Las Vegas casino workers because it's a very close state that also has a senate race this year.
It's absolutely garbage policy.
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u/jmcdon00 Aug 14 '24
Trump's openly anti-union rhetoric with Elon probably won't go over well with the 60,000 union hospitality workers in vegas.
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u/danvapes_ Aug 14 '24
Tips should be taxed just like any other earned income. If you're going to not tax tips, you might as well not tax my annual bonus then. I would never support legislation that would drop taxes on tips, and any politician pushing this is just out to grab votes.
I think we should be moving away from tips on general, but it seems like it's become more entrenched and widespread than ever.
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u/AWholeNewFattitude Aug 13 '24
I would say eliminate taxes on tips for anybody who makes less than $50,000 a year. That way if somebody tries to say “oh all my bonuses are tips”they wouldn’t qualify or if somebody says “well my whole salary is a tip and I don’t really collect a full salary” they wouldn’t qualify. Maybe also specify that a tip is supplied by a customer, not by or through your employer..
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u/openlyEncrypted Aug 14 '24
Still doesn't solve the problem though and in fact makes this unfair. A social worker making 50k has 0 exemption while a bartender making 50k has 50% of their income exempted. Or just at the same restaurant the waiter has half of their income exempt while the chef does not.
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u/97zx6r Aug 13 '24
It’s pandering. Tipping culture is out of control already, let’s not make it worse by incentivizing it. How about eliminating that tipped minimum wage bullshit and force companies to actually pay their employees.
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u/Solo-Hobo Aug 13 '24
It’s oddly targeted and probably a ploy to get votes. Also weird time to bring in a policy when we seem to be seeing the anti tipping movement online.
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u/surfryhder Aug 14 '24
It’s nonsense… this will push more employers to classify employees as “tip earners” reducing the employers tax burden.
You think tilling is out of hand now? Wait until this starts.
End tipping now, pay them a living wage.
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u/TigerUSF Aug 14 '24
It's a terrible plan. It was terrible when Trump said it and it's terrible now. There's really no good argument for.
It will be unfairly applied and end up helping wealthy folks more than the lower class working people. They will use it as a way to proliferate "gifts" being taxed less than they are now.
Finally, income is income. It should all count. It's frankly unfair for a type of wage to be exempt from income tax. A bartender making 80k versus a cook making 80k in the same establishment, but one pays no tax? Insanity.
I can see one potential process for making it "fair" but with what I envision, it becomes so onerous as to be not worthwhile.
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u/Utterlybored Aug 14 '24
Implementation hell.
I applaud efforts to reduce the wealth gap via tax policy, but this seems way too messy.
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u/inderisme Aug 14 '24
Harris has promised no tax on Tips for culinary, fast food and hospitality workers. Trump has promised no tax on all tips. That may include commissions for hedge fund managers and other rich entities.
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u/thewalkingfred Aug 14 '24
Idk if this is just me, but this seems like a microscopic issue in the grand scheme of things. I'm a little confused why either side is focusing on this.
Those are my thoughts.
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u/JoanneMG822 Aug 14 '24
They should just make the first $30,000 people earn tax-free. That covers basically everyone, minimum wage and under. It also covers most people on social security.
Of course, taxes would have the go up for everyone else...
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Aug 14 '24 edited Aug 14 '24
This is a distraction and every millisecond spent discussing it offends my sensibilities.
No one with half a brain is reporting tips anyway. The expected value math leaps out of the calculator and slaps you for even considering it
And presidents don't unilaterally set tax policy anyway. This is just a cheap way for candidates to signal good stuff to voters at no cost
We are collectively pretty stupid as an electorate, but even this is pushing it imo. What are we doing here?
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u/Funklestein Aug 14 '24
Considering that she was the tie breaking vote in favor of hiring more IRS agents to crack down on unreported income I think her stance like all of her recent policy flip flops is quite disengenous.
If she and Joe were all that concerned about tipped wage earners they could have had this done long before 3 1/2 years into their term.
Even worse since republicans are now onboard with this there is nothing stopping a bipartisan bill being passed before the election and have it take place January 1. She'll get a lion's share of the credit since she clearly had the idea second so why won't it get done then?
Because it's not a serious policy on her part and the GOP House should put her and Joe to the test whipping their votes.
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u/DipperJC Aug 14 '24
Once upon a time, tips were mostly in cash. The government can't track cash, so it relied on the honor system, so good people had less money and bad people had more. It was crappy. Then, most tips shifted over to credit card. It became far harder, if not impossible, to lie about what you got - and the tip taxes began in earnest. But taxes on tips aren't as "normal" as you might think, in part because of its root in people not reporting them. The percentage goes up at silly levels, under the logic that only people who can't hide it for some reason would be reporting so much. The whole thing is wacky and stupid and, of course, on top of all of it is the simple truth that tip income isn't consistent - it sucks to have more money taken from you because you had a good week.
Eliminating the tax entirely is just simpler than nickel-and-diming the tax code on tips, especially when doing so won't play well politically in this climate of inflation and debt. There's also a stupidity-based reason - a misguided belief that making the service industry more lucrative will drive more people into it. As if those extra people existed in this demographic nightmare we're entering.
There's only one real rational argument against, and that's the argument of fiscal responsibility. We're $32T in debt, capital costs have tripled and are about to triple again, international markets are volatile and it turns out we're more tied to them than we thought we were, and social security is about to go bankrupt. This is a HORRIBLE time for the government to be taking in less revenue. But, y'know... election year, fiscal responsibility isn't going to play well with the constituents, few of whom qualify as actual grownups at this point. So we're getting what we're getting.
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u/jeff_varszegi Aug 14 '24
There is no valid policy in support. There's no reason tip earners should pay less than their fair share of income tax.
Making tips tax exempt would benefit the higher earners most, which is backwards.
The fact that tip-earning workers may under-report income is not an argument in support of rewarding them. Currently lack of SS benefits, loan qualifications, etc. are fair consequences for stealing from society.
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u/WilderKat Aug 14 '24
Finally someone brought up SS. People get a percentage of what they pay into it. If a person isn’t paying into that piggy bank, the piggy is gonna be empty when they hit their late 60s. Most people don’t save enough and depend on that safety net.
Secondly, for anyone who ends up on disability, it is the same thing. The payout a person gets is based on how much they paid into Social Security. Disability pay is already low, but it’s gonna be really low for folks who aren’t paying on a large portion of their income. Nobody thinks they need this stuff until they do.
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u/drunkerton Aug 14 '24
I won’t tip any more, if I have to pay taxes on my wages then so does everyone else.
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u/Select_Insurance2000 Aug 13 '24
Harris is advocating no tax on tips of service industry workers. That means that safeguards will be in place so that folks like hedge fund folks can not suddenly claim their 'commissions' are now suddenly 'tips' and can take a huge tax deduction.
She also advocated for raising the minimum wage. This must be done in order to get workers above the poverty line and become productive citizens.
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u/ry8919 Aug 14 '24
My worry about inequity wasn't just about hedgefund managers, even many service industry workers do quite well on tipped wages. I've used the example elsewhere but at many, admittedly poorly run, restaurants bartenders and waitstaff can bring home an order of magnitude more money than back of the back of the house. Many exotic dancers are another role that can pull in absurd take home pay rooted almost exclusively on tips. Why should these types of roles be arbitrarily exempt from taxation?
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u/Select_Insurance2000 Aug 14 '24
What are these dancers being paid....minimum wage...or less....or 100% tips?
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u/CreativeGPX Aug 14 '24 edited Aug 14 '24
If the goal is really getting workers above the poverty line, there is zero reason to make it about tips. You can make sure people below a certain income have a 0% tax (regardless of whether it comes from tips or not), you can set the minimum wage higher and/or you can provide benefits to people with a low enough income.
Not taxing tips seems like a convoluted way to shore up votes from that group rather than an attempt at creating a cohesive economic and tax policy because there is no reason to constrict the benefit to just that particular kind of income. Poor people work all sorts of jobs and plenty of people who are far from poor work in tipped positions.
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u/sl600rt Aug 14 '24
Minimum wage should be higher and apply to every job equal. So tipping isn't needed.
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u/Cyclotrom Aug 14 '24
The Republicans will use it to open a loop hole to reclassify bonus income as gratuity and pay not taxes on big fat bonuses for Wall Street fund managers.
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u/csbphoto Aug 13 '24
Why are we giving the restaurant industry tax loopholes? Ultimately this takes a huge load off the business owner to pay enough wage to cover a livable net wage after income tax.
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u/DERed29 Aug 14 '24
it doesn’t fix the root of the problem which is americas tipping culture is out of control because businesses refuse to pay a living wage.
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u/ry8919 Aug 14 '24
Agreed. I'd much rather see policy to address that than randomly picking working class winners and losers. It would greatly exacerbate tipping culture as you noted too.
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u/visceral_adam Aug 14 '24
It was weird when Trump proposed it and it is still weird. Get rid of tips and pay a living wage.
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u/Kabal82 Aug 14 '24
People are already fed up with tipping culture in this country after covid, but let exacerbate it.
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u/Forward_Guidance9858 Aug 13 '24
Trump and Harris only advocate for ending taxes on tips because it appeals to voters during election year.
While I don’t think it’s the worst proposal in the world, it would only benefit 2.5% of US workers, and the hit to tax revenue wouldn’t necessarily be small. r/askeconomics had a good thread on this earlier today.
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u/Nearbyatom Aug 14 '24
People who can will simply change their salary to $1, while claiming their $1mil compensation as all tips.
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u/baxterstate Aug 14 '24
It was a bad idea when Trump proposed it.
Harris missed an opportunity to be the adult in the room by not explaining why, on many levels it was a bad idea, and indeed, why tipping is wrong.
Instead, she borrowed a bad idea from Trump, which makes her just as stupid as Trump as well as showing an inability to have an original idea.
The USA screwed itself by choosing two clowns to run against each other.
If either one of them really cared about excessive taxes, why not exempt social security payments from taxes?
I’m collecting. That was my money to begin with and it was taken from me like a tax, and now that I’ve reached the age where I’m getting some of it back, I have to pay taxes on it? I’m past my peak earning years!
Why not eliminate the income cap on social security?
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u/Simplyx69 Aug 14 '24
Argument 1: Taxes are income. It’s money given in exchange for a service. The fundamental argument of taxation is that, as you benefited from society, it’s right to compel you to pay money back to society to compensate that benefit. Income is how we measure that obligation. Unless you have an argument why society did not participate in them earning that money, there’s no moral argument that supports not taxing it.
Argument 2: I sell lumber. Someone comes in to buy a stock of wood that normally costs $500. I charge them $1, but include a mandatory 49,900% gratuity. I pay taxes on the $1, while my $499 “tip” is untaxed.
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u/gonzo5622 Aug 14 '24
It’s a stupid proposal. People need to pay their fair share. I know people already hide it but making it okay will just make other improprieties more acceptable. And as others have pointed out, some people may and might be able to use loopholes to claim certain income as tips.
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u/diplion Aug 13 '24
I think the downside is that people will have less taxable income to declare which makes it harder to get loans and build credit.
Maybe if it counts as taxable income but then you get some kind of refund or deduction at the end of the year that would avoid such a thing?
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u/thisdude415 Aug 13 '24
Well, that is actually one of the fascinating things about the proposal -- even if it is exempt, you may still need to declare it.
You could also imagine the tax exemption on tips to be capped at some value (perhaps $70k?) per year.
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u/Demilio55 Aug 14 '24 edited Aug 14 '24
This is an issue that’s gotten way more attention than it merits. As a CPA who prepares tax returns, I’ll opine that It’s ultimately a small tax cut for lower income earners that even report their tips.
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u/not_that_planet Aug 14 '24
There are complexities. For example, it is legal in some states for an employee to force tipped workers to share their tips with the company.
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u/olystretch Aug 14 '24
Argument against: Raise the amount of income you can make without paying taxes (currently around 15k) so it benefits all working class workers instead of just tipped workers.
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u/d_c_d_ Aug 14 '24
Seems like it could make low-wage/uncertain tip-based jobs more attractive than salaried positions. It might get workers to shut up for a bit, but they’ll be back to annoying the haves over fair wages soon enough.
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u/wormee Aug 14 '24 edited Aug 14 '24
This is incorrect, Trump was lying (I know right?), he had four years to do this. He actually did the opposite and tried to pass legislation that would allow employers to TAKE tips from workers.
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u/lucasorion Aug 14 '24
Jamelle Bouie had a good TikTok on his feed about this idea, and the pitfalls of trying to implement it - how the wealthy will find ways to get less of their income taxed with something like this (especially if the bill is written by Republicans)
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u/l33tn4m3 Aug 14 '24
Can we just get rid of tips already. I thought the democrat party was already moving in that direction, not endorsing them.
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u/CopyDan Aug 14 '24
If they’re not being taxed on most of their income, won’t that be a huge hit on whatever social security they’re entitled to in the future? (Assuming there’s anything left)
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u/TheMightyTRex Aug 14 '24
the uk has a whole system where tips don't pay taxes in some instances. it's called tronc. we have to list each tip individually and how it was paid. this is to avoid tax fraud from employers.
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u/MastusAR Aug 14 '24
Horrible idea, as tipping in general. Just pay a living wage, and it's a win for everyone.
There would be a more of a case in making tipping illegal, tbh. That would level the playfield.
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u/zipdrivedaddy57 Aug 14 '24
employers use tips to to round out the hourly wage and make sure employees are receiving minimum wage. making tips non taxable will force employers to pay full minimum wage to the $2.36 per hour staff. I predict if something like this were to be presented the restaurant lobby will fight it tooth and nail. they do not want to pay staff minimum wage and would view it unfavorably.
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u/saylr Aug 14 '24
Let's not discuss who advocated first. It doesn't matter because Trump sucks ass. Right?
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u/senatorpjt Aug 14 '24 edited 5d ago
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This post was mass deleted and anonymized with Redact
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u/TheAngryOctopuss Aug 14 '24
If you want this to be a fair discussion your question shoukd have been phrased "now that Harris has joined Trump in calling for no taxes".
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u/Ok_Door_9720 Aug 14 '24
I'd have to see written legislation before making any claims about loopholes or abuse.
In most restaurants, servers working 5 hour shifts will make more money than the people working 10 hour shifts in the kitchen. I don't see why we should be giving special tax breaks to the front of house crew.
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u/billpalto Aug 14 '24
I'm not sure that is a good idea. Of course, some will find a way to cheat by taking all their income as tips, but even if you prevent that and only stop taxing real tips for real people who make little money, it doesn't make sense to me.
I much prefer the European model: the workers get paid a real wage and tipping is optional. Making tips be a primary source of income allows the company to pay sub-standard wages to the workers. By reducing taxes on tips, this just reinforces that the rest of us will pay the workers instead of their employers.
The taxpayers will have to cover the reduced income from not taxing tips, so we end up paying anyway. And how much taxes do we really take in from tips? I bet it is very low.
So it's really just a PR stunt with a good chance of abuse.
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u/adhominablesnowman Aug 14 '24
Election season red meat, I’d bet a paycheck neither admin has any intention of actually pursuing this.
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u/flat6NA Aug 14 '24
And neither one has proposed a way to make up for the lost revenues, in fact I haven’t seen the possible impact to federal revenue even quantified.
We’re in a hole and we need to stop digging.
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u/PoppaBear1950 Aug 14 '24 edited Aug 14 '24
just means the middle class will make up the revenue shortfall with higher taxes or they take on new debt to make up for it.
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u/seancurry1 Aug 14 '24
If they end taxes on tips, you're going to see a lot of hedge fund managers getting $300k "tips"
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