Comment by littlexsparkee
2 days ago
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.
That’s a weird way to say a sizable majority of tipped workers do pay taxes and will benefit from this.
Beware the logical fallacy. "A implies B" does not mean that "not A implies not B".
Workers who earn too little to pay taxes (A) will not benefit from a tax cut (B).
But workers who earn enough (not A) may still not benefit (not B), for example because their employer indirectly pockets the difference. That is actually being argued in the article.
So this is indeed the appropriate way of formulating the statement: at least 40% of workers will demonstrably not benefit from this.
Pretty sure they are aware, they included the qualifier "a sizeable majority" instead of implying it applied to all.
I can't read this article because of the paywall. Are they saying that taxable tips are subject to payroll taxes (which employers pay out of pocket)? That would actually benefit both employers and employees in some sense.
Some tipped workers, like bartenders, can make more in tips than a junior software engineer lol. Less taxes definitely helps their cause.
If you are concerned with indirect effects, there's quite a few pros and cons that you could extrapolate from the no tax on tips policy. These arguments are far less compelling in general.
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But it would be true to say not B implies not A right? (contrapositive?)
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it's indirect tax credits for businesses that don't want to pay workers.
No, it isn't. It doesn't affect the wage they have to pay them. It just affects whether the employees need to pay taxes on tips.
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There is no useful point to saying what you just said.
You can make that argument about literally anything that reduces the tax burden on people who's primary income is useful income.
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The tax system is graduated. If 40% don’t make enough to hit a band where income is taxed, then you can assume it’s a gentle ride from paying no taxes to not paying much taxes. And anyways, payroll taxes are by far the higher burden for service workers than income taxes.
Well, to be fair, the IRS considers the average tip to be 8% for taxation purposes.
The whole "I get taxed whether you tip me or not", "I have to pay to serve you if you don't tip"? No, not so much. If you can show (there's even a hugely burdensome IRS form that might take as much as 3-4 minutes a month for cash tips) that you earned less than that 8% average, then that's what you get taxed. But most servers don't want to fill that form out, because they get ... rather more than that, and are being undertaxed already.
Sure, but TFA makes clear that any benefit to workers from tax-free tips is laughable compared to the numbers of times the restaurant lobby has fucked them over, by repeatedly killing attempts to keep wages low. It's not even throwing workers scraps, it's more like throwing them crumbs.
and it’s a not even a forever thing like the rich guys got. this thing sunsets.
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.
Yes, creating special exceptions like this is an awful idea.
More carve-outs complicating the tax code and pandering to specific constituents is a bad thing.
It reminds me of listening to a story of how day care business owner-operators are not required by law to contribute to Social Security, don’t, and are then screwed at the end of their life because they don’t have any way to retire.
No tax on tips does not apply to payroll taxes (FICA).
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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 though. Cash tips often were, practically speaking, so a lot of tax evasion was happening, but it still seems odd to single them out.
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.
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Seven states do not have a separate, lower minimum wage for tipped employees. Instead, they require employers to pay tipped employees the full state minimum wage, regardless of tips received. These states are Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.
Sixteen states use the federal tipped minimum wage of $2.13: Alabama, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, and Wyoming.
https://www.epi.org/minimum-wage-tracker/
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I made a longer comment in the main thread[0] because I think there's a tendency for conversations about tipping to degrade as people are making different assumptions based on the different laws of where they're from or grew up.
To be clear:
We always need to make sure we distinguish a conversation about wage theft and a conversation about tipping. I think they are unknowingly being used interchangeably (or as an assumption in a conversation)
[0] https://news.ycombinator.com/item?id=44751537 (sources linked here)
[1] Federal only lets max credit of 70% of min wage. Some states go up to ~75% of min wage, but their minimum wage is higher than federal.
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> even McDonalds is charging $15 for a 4 oz burger
Jeez, where is this? According to the famous McCheapest map the most expensive Big Mac in America is about 8 bucks. Have prices really shot up that much recently?
https://pantryandlarder.com/mccheapest
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I'm happy that CA doesn't set a lower min wage for tipped workers, but the problem is that in many/most places in CA, $19/hr is still not a living wage, so the tips are more or less required to keep those workers housed and eating.
A living wage in most population centers in CA is nearly $30/hr.
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It's actually even worse than that. The $19/hr and health insurance comes from increasing menu prices, so with flat percentage tips, you're paying more purely for the privilege of paying more.
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).
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>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.
Don't tip, especially 20%, for over the counter service. That is ridiculous.
>I'm not sure why they specifically should be tax exempt though. Cash tips often were, practically speaking, so a lot of tax evasion was happening, but it still seems odd to single them out.
It's just a gimmick to get votes. The theory is that poor people tend to be the ones that work these jobs, they need a break, and it's not a policy that would cost very much anyway. There is a cap on the tips and most cash tips were going unreported anyway.