Comment by 9rx

> Restaurant owners don't pay payroll taxes on tips, but they do pay it on regular wages.

Payroll taxes in most jurisdictions are based on wages, not profitability of the business. A non-issue, well, except maybe for the server who has grown accustomed to making $50/hr. No tips and those days are long gone.

> Some restaurants have tried this out, and it's backfired.

Yup. Hard to win customers when tipping is part of the experience. I mean, it can be done where it isn't — McDonalds survives, thrives even, without tips — but if you are trying to run the type of restaurant where the customer comes to tip it doesn't fly. You have to give the customer what they want at the end of the day, else they'll go somewhere else. This is the challenge businesses face.

> Restaurants already run on very thin margins

Exactly, and if you increase the volume then the product of the margin gets bigger. Remember, Walmart and your average restaurant have the same profit margin! Walmart's advantage is that they handle way more money, so the total amount that margin represents is huge. If a restaurant can also handle more money...

> seeing 20% higher prices on the menu will make them spend less.

Even just, say, 1% higher still means more cashflow through the business, which means more cash to take a cut from. You are right that the full 20% would unlikely ever be realized, certainly not right away, but it doesn't need to be to still be advantageous. But until you figure out how to convince the customer to change their preferences about tipping, good luck.

There is absolutely no obligation to leave a tip. One only does so because they want to!