“No Tax on Tips” Includes Digital Creators, Too
hollywoodreporter.com
hollywoodreporter.com
> New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
* https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-...
There's also a maximum of $25k/year (~$2k/mo).
What in the world is driving this very high ceiling?
It's still a very good income, though.
It's all so cynical.
And what happens to the debt/deficit then? You know, the thing that the GOP constantly complains about but always makes worse?
The GOP loves to cut revenues (taxes, especially for top percentiles):
My understanding is that this is true for all the Trump handouts: otherwise the ten-year economic outlooks would have cratered. The Economist had a couple of nice analyses on this.
Of course this means that the next administration will need to start with tax increases just to get to neutral, but maybe that is a feature?
Only those for humans expire. The corporate tax cuts are forever. Read into that what you will.
Not just that - they're often timed to expire early into the next administration which, if Democrats win, is an instant "look how the Democrats treat the working folk!" hammer. e.g. "Tax Cuts and Jobs Act" from 2017, expiring at the end of 2025[0].
[0] https://theconversation.com/trumps-plans-to-extend-tax-cuts-...
Oh no.
What you have missed is the incredible end run around the spirit of the reconciliation process that the Republicans did this time around.
So, the did these tricks with the tax in Trump's first term, with tax breaks set to sunset in order to have a revenue-neutral effect over the required ten years.
This time around they needed to extend those breaks, right? So they must had to cut spending or raise other taxes in order to do that and have a revenue-neutral effect, right?
Ha ha, no! They convinced the CBO that the baseline for the reconciliation process this time should be whatever was in effect for the last few years. So those breaks are already baked in and don't need to be counterbalanced. It's a two-step, long-term process for making things permanent through the reconciliation process that otherwise one could not.
"And the cook?" "What?"
"The cook wants in on the no-tax-on-tips so we're asking how much you'd like to tip him. We're also going to ask for the cleaner and the guy who delivered the ingredients earlier this morning."
Several restaurant owners are advocating in Italy to make 20% tips mandatory so they can reduce their costs.
What you're referring to as "tip", is the coperto. It's a minimal, fixed, optional fee that includes service, bread and table setting.
Not every place makes you pay it, it's more common in more expensive restaurants, but still, it ranges from 0 to an average 2 euros per person.
Comparing it to %-based mandatory tips in US is nonsense.
You can see this difference in customer experience worldwide. Nowhere delivers consistently attentive service quite like the US. By contrast, many European countries, especially those where tipping is uncommon (such as the Netherlands), often provide service that feels efficient but impersonal.
Dining out in Italy is phenomenal for many reasons, a laid back serving culture is just one of them.
You want to have a stress free experience the waiters tries to upsell you at every corner.
If you mistake upselling for attention then you're part of the tipping complex already.
Good service comes from good training and experience not the assumed money left over in your wallet. That's the businesses goal of not leaving any money on the table. So the alignment is between the business owner and the employee if anything, not between employee and customer.
I would make an exception for bars, but that's about it.
The correlation is simple. The better the perceived service from the customer, the bigger the tip is.
>You want to have a stress free experience the waiters tries to upsell you at every corner.
In the vast majority of restaurants the server has little interest in upselling you. The exception is, perhaps, at a place with an expensive wine list (and regardless of tipping, businesses will be looking to upsell that wine list).
>Good service comes from good training and experience not the assumed money left over in your wallet.
Speaking as someone with industry experience, this is honestly just funny to read.
Training? For a server? Lol!
These are by and large scrappy people (and I say this lovingly). Lots of cursing, dubious substances, people working hella long hours in other jobs, people who are just planning on working for a few weeks and then leaving, etc. Yet when a big table comes in, they button up and act perfectly, despite cursing about the customers in the back, and the incentive is not "up selling" (servers care about seat count and nothing else - that's how the hierarchy of the seating pecking order is structured) it's about tip money.
Good service doesn't come from experience either. The newest servers will basically give the best service (they're nice to everyone), while often the most experienced servers are the most jaded and cranky. It's a rough job to be part of long term and it breaks you down a bit.
Also, regulars who tip well are truly appreciated by the service staff, and the staff really does go out of their way to make sure they get good service. This is because of the steady, predictable income stream. I don't know what to tell you other than, yes, the tip money absolutely does play a large part in the customer experience, and there is a correlation.
Make your driver’s day, they’ll see your tip before they accept your ride”
This reminds me of the old Soviet union where the rates were fixed by some central committee. In order to get a cab to pick you up, you would hold up fingers that represented how much extra you would tip. The more fingers, the more likely the drivers would actually stop.
This paragraph reads like it was written by someone who’s never been to planet earth but has diligently read documentation on how it works.
I personally _hate_ American service with passion.
I prefer to be left alone most of the time in restaurants or not being talked to like the best friend I haven’t seen from the high school.
I also have an expectation that the waiter is not in a desperate position to rely on a tip for their living and is fairly compensated by their base salary.
My preference isn't necessarily for American-style service, that's just an assumption you'd be making with zero information.
Besides, I’d rather have efficient and impersonal than (at best) fake nice.
And you think other hourly service workers aren't being that way to some degree? Lol.
Like plumbers, electricians, mechanics, carpenters/framers?
But why exactly ?
I have found this to be true in pretty much all interactions (on average), regardless of whether the person is on a tipped wage.
Americans value salesmanship and customer service in ways that few other countries I've been to do. They market better, they sell better, they make customers feel better, in pretty much all types of businesses.
Source: someone who's lived in three major US metropolitan areas, and two in the EU.
Do people tip their accountants? Their nurses and doctors? Their dentist? Their mechanic? The cashier at the grocery store? The clerk at the shoe store who fetches the shoe in the size/colour I want?
Perhaps people should just do their jobs properly because that is what they're paid to do. And if they're not doing their jobs such that the restaurant/business suffers in its reputable they get fired and replaced by someone who will. (Kind of like how I have to do the job I'm paid to in IT or the company will act accordingly if I do not.)
Then I'm the bad guy for refusing to pay for something I didn't want in the first place.
In Brazil we have 10% tip which you can opt out, and we usually do it when there is a problem with the service, but I wouldn't think twice to ask for the tip to be excluded if I was undergoing financial hardships, and I'm sure nobody would bat an eye.
I think it's not just the tip culture that is toxic. I feel like the entire American culture is plagued by toxic masculinity, the gun culture and hyper individuality.
Opting not to tip when it is part of the economic transaction is no different from walking out with the silverware; not expressly forbidden, just a breach of social contract.
Isn't property theft very expressly forbidden?
And walking out with silverware is theft, I genuinely have no idea where you pulled that from as a similar example.
There's lots of evidence that tips vary significantly based on the traits of the customer (like the customer's self-esteem and sense of shame: https://www.emerald.com/insight/content/doi/10.1108/ijchm-02...) and the employee asking for the tip (e.g. attractiveness and simple demographic characteristics: https://www.sciencedirect.com/science/article/abs/pii/S01674...).
Well, shit, if I made it part of the economic transaction, you'd have a point. What you're saying is that the employers are not holding up their end of the transaction.
Let me put it another way for my foreign friends - if you are dining at a restaurant in America with table service, you need to consider (at least) a 15% tip as part of the base cost. If you can't afford that, then you can't afford to eat out, choose a different option.
No, it is not true for California
This actually varies state by state. In Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington the minimum wage does not change tipped vs non-tipped. Also in other states if the pay after tips do not meet the state minimum wage the employer is required to make up this difference.
If you actually look at the data tipped employees make significantly more vs median income in countries with tipping than without.
> If you can't afford that, then you can't afford to eat out, choose a different option.
I think this works if we're talking about a full restaurant, If we're talking about a mostly empty restaurant then even a 5% tip is money that the server would have not otherwise had, pretty certain they'd choose more money over less.
Wouldn't it make far more sense to just pay them a living wage and charge what that costs and be done? It's genuinely the only part of eating out that annoys me is it ends with a math quiz.
Americans pride themselves on their rugged individuality but deep down it is all very collectivist.
Actually, if tips don't bring tipped minimum wage to minimum wage, employers are required to increase pay to minimum wage.
In theory the federal or state department of labor could do something without the worker needing a lawyer. The federal DoL is useless in such cases and most state DoLs don't seem to do much either.
You would rather be let go for performance reasons rather than they will pay you difference in 5$
But I personally have chosen a different option because it's just exploitive all the way around. The business trying to exploit it's employees, the employees exploiting customers (10% being pushed up to 15%).
Why chef who is actually prepping your dish got fixed rate but pretty girl should get percentage of the total bill?
If I order a $100 bottle of wine, should I add $10 for the delivery from wine room? And extra 5$ for the opening? And $5 for refill?
And lo, norms are made, the ratchet turns, culture solidifies, a new line written to the social contract. And tip-dependent workers have non-optional tipping.
If you really want a logic to follow strictly — any worker class whose wages are depressed by expected tipping should be tipped
No, I don't need to do anything. Restaurants are free to charge a service fee and state that plainly on the menu, as many already do. Otherwise it's optional and I will treat it as such.
Tipping should be illegal to substitute for pay. Majority-tipped restaurants are almost always predatory and take advantage of both customers and employees in order to further enrich the owners.
A utilitarian only interested in pure food quality is much better off cooking at home. You can do better at a quarter the price.
Food/software is only about 25% of the cost and value in these businesses, though perceptions on value differ of course.
My single reference is the Norwegian upscale restaurant Theatercafeen, which introduced tip pooling across waiters and kitchen. It was highly contentious when introduced by the restaurant: The waiters took the case to the courts, and it went all the way to the supreme court of Norway [1], where it was decided that the employer could decide rules for tip-sharing.
[1]: https://www.arbeidsrettsadvokater.no/domstolsnytt/dom-deling...
There's always this narrative about tipping allowing for exceptional service and I wanted to know what meta advantages or options have you been given or seen as a result of this?
I'm reminded by Charlie Sheen's character in two and a half men consistently tipping the pizza delivery driver who brings him a champagne bottle with his pizza.
As a comparison elsewhere, I've had French wait staff bring me bread at the table whenever I visit Paris and even if the restaurant is out they source it from nearby restaurants unprompted with no expectation of a tip even though I would perceive that as being above and beyond service.
I'm trying to understand if we're all on the same page about great and even exceptional service :)
Remember, servers are dealing with the average American. A decent portion of the people that come in are extremely demanding. /Three rounds of sauce on the side in different configurations... Can I have the sauce from that dish on the other table on the side of my dish? Oh it's part of the cooking process? Can you ask the chef if he can put it in a little ramekin? Oh it's a sickly sweet glaze that needs to be cooked? I think I'll try a little bit of it anyway. Ewww this is disgusting take this back!
Dealing with this day in and day out will default you to that service state after a while, especially because the "average working class Americans" often tip the best.
Every server knows screwing up the actual food nukes their tip (and it often does). If they're working in that context and still messing that up, well, they probably can't be helped.
I want them to check in to ensure that the order was (a) correct, and (b) properly cooked.
There may be instances in which you drop some cutlery or need an extra napkin, and a quick check-in could be useful. You could also flag them down with a raised hand or eye contact. A busser could achieve the same results too (also refilling water glasses).
However, I'm not at all convinced this is as tied to tipping as people claim. My own country has a very clear and old tipping culture (though 10% is the more common "target" tip for food service), and yet service here is often terrible, with bored and annoyed waiters. I think it's much more of a cultural norm than any kind of strong economic incentives.
None for me.
The most common difference: restaurant wait staff aggressively removing plates as soon as or before you are done with them. While in Europe that obviously would be rushed and seen as overly aggressive and a hint that it's time to get the hell out to make space for other dinners. Super rude in Europe, considered attentive service in the US.
Striking experience: At an allegedly "five star" resort in the US, some wait staff being very loud and chummy with the guests to the point of disturbing the guests, and other guests, and neglecting other tables! Inconceivable in Europe - reserved for top management or owners. And failures to pay attention left and right - by all the staff everywhere. Clearly blameable on management defining the wrong parameters as objectives to their staff.
Tipping in the US is entirely hit or miss: some staff will remember past tipping, but only some. Some staff make a visible effort at service (before tipping), but only some. Etc.
But to be fair, there was a time when service in Paris got so bad and rude that the waiters corporation ran ad campaigns asking them to cut it out and do better. French service still has a bad reputation (of rudeness and scams). And there, it's very much NOT that waiters don't know what to do and not do. They know.
I would see working out "out of bread" with the neighbors as normal when the restaurant is not super busy, and "above and beyond" at rush hours. But then in France, running out of bread before very late in rush hours would be a clear management failure.
This may be the case some of the time, but from what I’ve seen and heard…
During COVID, everyone put out the tip jar. It turns out that some folks are willing to give in spots that are not “traditional” tipping situations.
Some folks just have extra money, and they are happy to share their wealth with others. This is doubly true in hard times.
Tips are one way to do that, and some folks do that with extra generosity.
I will also add that people seem to be more than happy to tip/give extremely generously to folks who “make their day”. Maybe it’s a great ride share driver, or a great massage therapist, or an online streamer, or whatever. Some people seem to be more than willing to tip folks who bring them joy.
All that said, if that’s not your style, just click skip and move on. Most people understand and won’t judge.
There are a handful of entitled people who will try to guilt people into typing in non-traditional tipping spots. Just don’t go back to those places if at all possible — those people suck.
Multiple times I've been travelling for dinner with coworkers and someone notes "oh, tip is already included here" (be it the group size, the way the place works normally, or whatever reason) and then half the table starts redoing the receipt because they were tricked into it. This example highlights it's not always about intent, work already has a set policy of how to tip (i.e. no generosity or etc involved), people are just getting plain tricked into doing something else instead. Regardless - it's successful in the growth of tips, so it spreads.
Similarly, "just click skip and move on" puts the friction in the wrong direction - especially if you're not alone. It's great that it can apply a lot of the time, but the problem is it has friction, sometimes strong, in certain scenarios - again, this friction is only weighted towards the growth of tips.
Lastly, the vast majority of people have some level of desire to be fair, even if they don't want to be generous. Any uncertainty which can be created in the tipping process ("am I supposed to tip here?", "is the tip in the service charge, if so how much goes to the person/how much were they expecting to get in total?", "is the recommended tip on the receipt more than I expected", and so on) tends to push people to tip more than their generosity alone would have inclined, and it's really quite unfair to say the solution is to just click skip and hope all will understand each time.
Unfortunately, there is pretty much nothing pushing in the opposite direction. Your options as an individual, or even sizable portion of society, are to shit on the wait staff's income about it in hopes they complain enough that management gives them a better salary (that'd take quite the movement). Everything about this side has the exact opposite incentive pressures as the above, and so whether particularly generous folks are a factor or not... there's really nothing that's going to get done about it for the typical person.
Maybe we can start some place in the middle of "being able to walk into a place and understand what the cost will be up front", such as including tax in the base prices of things, and it'll open more doors about tipping for the same consideration. Until then, we all are stuck with dealing with it.
My primarily option is to multiply the estimated cost of going to the restaurant by 1.3 (tip+tax) and make my decision about going there based on that figure, not on published menu prices.
It's my way of giving someone a little appreciation because they're (typically) doing a job I wouldn't want to do myself.
It's got virtually nothing to do with the quality of service I get. I always tip the same amount even when service is bad. There have only been maybe 3 exceptions in my nearly 3 decades of adult life.
I'm fortunate to be able to afford a little bit of generosity for service people, so I do it.
Edit: I should add that, in places where there's a customary tipping practice (eg: US restaurants), I tip above the customary amount no questions asked. The "generosity" is the amount above customary.
If you leave money on the table, the server will chase you down, to give it back.
In the US, you get shit service, and they give you the stinkeye, if you don't tip at least 20%.
Truly USA is an overpriced country with the only good thing being that jobs are high paying… and that’s it.
I think the best thing in life is to have a remote job somehow + travel 50% of the time + stay w friends and family 50% of the time
The USA is ranked sixth in purchasing power in the world, meaning we are definitionally underpriced.
The countries that have even more purchasing power are: Norway, Macau, Bermuda, Singapore, and Luxembourg.
Today? You're easily paying 3/400$ per night in Manhattan and other cities. Same is true for dining, museums, transport.
Everything is insanely expensive compared to what it was just few years ago.
Services are even more expensive.
I wouldn’t be surprised if they are being instructed to accept tips, in order to keep the customer happy.
Many of them end up in hospitality, especially in touristic places, due to different reasons, but very importantly, immigrants from south Asia generally speak English fluently, something Japanese people rarely do.
I've seen plenty of "japanese" restaurants in Shinjuku where not a single member of the staff was japanese.
Another place where you're gonna see plenty of immigrants are all convenience stores.
Please keep your tip customs out of our culture. Next time just say thank you several times to show you appreciate them.
Edit: closed in 2023 after 14 years.
Bluetti hit the "are you actually fucking serious?" level for me with the tips. They ask you for a % tip when you order online from them. No employee contact, no consultation. I just added a $2k item to the basket, tried to pay and got an invitation to tip extra.
To me, a more appropriate name is "Some taxes on tips".
But that's not winning an election.
For example, half of parents are transferring an average of $1,500/month, tax-free, to their adult children.* Why do they get to do this?
Or to take it to absurdity, why aren't my donations to charities taxed? What's the reason for the carveout? Should I instead donate earmarked cash to a charity that provides assistance to underpaid waitstaff?
[*] If you didn't hear that the other half are getting this, now you know: https://www.savings.com/insights/financial-support-for-adult...
> End tips and raise wages, and the taxes cease to be confusing or controversial.
Some businesses have tried this, but often it doesn't work out. To make this financially feasible, it would require action at the federal and state levels to 1) eliminate different tipped vs. regular tax rates (some places have done this already), 2) and modify how payroll taxes work to even things out a bit. It sounds like "oh, no problem we'll just raise prices by 20% to cover the extra salaries". But no, that doesn't work, because businesses and individuals are responsible for payroll tax on non-tipped salaries.
And there's a collective action problem at play: take two identical restaurants. One follows the now-standard model of accepting tips, and ~20% is customary. Their identical competitor won't accept tips, pays their staff better, and charges 20% more for their food. Fun outcome: people get sticker shock at the second place and go to the first place instead, even though in the end they pay exactly the same amount. Human psychology is dumb, and restaurants know this, so they won't do this unless all their competitors are also required to do it. (This is also why in the US prices are advertised tax-excluded; pricing that includes tax is viewed as more expensive, even if the final charge is the same.)
For the same reason we have a generous gift tax exemption applicable to any gift from anyone to anyone: If you’re not receiving something of monetary value in return, what you’re providing isn’t “income” in the sense Congress has built income tax policy to capture.
That isn’t the case with tips for waitstaff.
I mean, yeah, something like a third the former are college students! What a trash fire of an article.
edit: fixed year typo
If they had not been extended the taxes for those high earners would have dropped for 2025 and beyond.
The bottom 50% pay no taxes and the top 1% still pay 40+% of federal taxes.
No. They pay 40% of Federal income tax, specifically.
https://nymag.com/intelligencer/article/fact-check-richest-1...
> The bottom 50% pay no taxes
Same mistake here. They pay plenty of payroll etc. tax.
The top 1% pays 24% of Federal taxes, and the bottom 50% pays somewhere between 7% (bottom 40%) and 16% (bottom 60%).
Also I'm unclear if that source includes only the "employee half" of the 15% FICA.
Brilliant!
> By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages.
Who is charged the tax and who pays it are different things.
The "tax" the customer pays in those states is the "pass thru" charge. To make things fun, Hawaii imposes the excise tax (on the business) recursively on any tax charges passed thru to the customer.
https://en.wikipedia.org/wiki/Federal_Insurance_Contribution...
> The Federal Insurance Contributions Act (FICA /ˈfaɪkə/) is a United States federal payroll (or employment) tax payable by both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.
7.65% of your check until you hit the cap. Employer pays a similar amount.
https://dqydj.com/income-percentile-calculator/
But that would also mean uncapping the maximum amount you are eligible for for social security.
But, even if you did it would still help tremendously and possibly still be sufficient. There’s diminishing returns where lower income people get a higher percentage of their income as a social security benefit. As long as that policy is maintained the ultra high wage earners would be contributing far in excess of the benefit they get paid back out
No? Why would it mean that?
Currently, there's also a maximum amount of benefits. That could easily stay.
> Why would anyone support a system that is suppose to be to help you in retirement where you are paying an unlimited amount into a fund and then capping how much you get out?
Same reason people pay school taxes if they don't have kids. Because we live in a society, and we tax people to fund things like this.
> Same reason people pay school taxes if they don't have kids. Because we live in a society, and we tax people to fund things like this.
And educated children, police, roads, etc benefit society and we were all at one point kids who could take advantage of public education, I don’t even have a problem paying more in taxes for universal healthcare that will reduce my + employer expenses on my healthcare.
But paying an extra 12.4% for what was suppose to be a retirement account that I don’t get any benefit from and reduces the amount I can save toward my own retirement is a bridge too far. Since 2018, I’ve been slightly above the increasing social security maximum. So it’s not that I’m one of the 1%.
Our taxes are a way of funding current retirees' (and other SS recipients') benefits, not a way of funding our own individual future benefits.
The fact that paying more in increases our future benefit doesn't make it a retirement account.
"The more you put in the more you get out" is only because that is how your benefit is computed. It is not because there is a certain amount of your money somewhere.
Related: your benefit is calculated on your 35 highest income years, not the total sum of your contributions. [1]
Other thing worth noting: the AARP page about SS myths that literally says: "Myth #7: Social Security is like a retirement savings account." [2]
The trust funds for social security are used to pay for everyone's current benefits and the rest is invested [3]. The fact that it's supposed to remain solvent still doesn't make it a retirement account.
Yes: it feels like a retirement account because you pay in now and (hopefully) cash out later. But that is only a feeling.
And finally, I started my GP comment with "nit" as one of my first three words because I understand the distinction is somewhat hair-splitty, but it is still real and relevant to how we think about it.
1- https://www.forbes.com/sites/ebauer/2020/11/11/social-securi...
2- https://www.aarp.org/social-security/myths-misconceptions-ex...
That perspective could be someone who is willing to say “You know what, I already have enough, let’s make sure the floor is raised for everyone.” Someone who believes more in individualism would probably disagree with that perspective.
it may be technically correct, but it still impacts individual costs/income at pretty much exactly the same amount, because the costs are just passed down the chain.
This tells us nothing unless we know how their relative income shares. If the bottom 50% earns only 20% of all income (just an example) this is quite fair. If they earn 60%, it's unfair.
The number of people who just trot out this statistic without context is quite tiresome.
And of course everyone pays sales tax, property tax (even if they're a renter), payroll tax and so on.
Secondly, just because the median earner pays a 2% average income tax rate while the top 1% pays on average 21% doesn't tell us anything about its fairness. It ignores income share.
These are not the same, which is exactly the problem!
eg: The #1 most wealthy American is Larry Ellison, whose net worth increased $89B today with zero tax implications.
An increase in the estimates value of your real estate holdings does not trigger a capital gain. Your municipality, however, may use it as an excuse to increase their assessment of the value of your property, which is used to calculate the tax they charge.
I imagine there'd be some net worth number, excluding retirement accounts, that policy wonks could work up. You draw the line between "wealthy" and "regular" there. Or, more likely, several lines because there would be wealth brackets similar to income brackets. Without that it would be a regressive tax.
I'm actually against property taxes, or any kind of tax where you risk losing property just because you managed to live another year.
It seems quite reasonable that unrealized capital gains would be treated differently for "a primary residence" vs "a multi-billion-dollar stake in a company controlled by the owner."
A far better question is: Why does my company pay me in cash (40% marginal tax rate) instead of "equity shares of 'special partnership units' representing the value added by verteu's labor" (20% capital gains tax)?
Or: "How did Mitt Romney's Roth IRA grow to $100,000,000 with a $7,000 annual contribution limit?"
The math on taxing unrealized gains or losses doesn't work out for the reasons you pointed out. Property taxes, on the other hand, have been working for a long time.
Does he get a refund if he loses money or is it just tax if you win, tax if you lose, tax if it doesn't move?
I'll give a few feelings about property taxes. They are known up front when the purchase is made. There's an expectation that they remain reasonably consistent year over year. In that way they can be consistently planned for, enough that it's seen as more of a maintenance expense for upkeep of local services rather than a wealth tax. If my neighbor sells their comparable property for double what they paid for it a few short years I don't expect my tax bill to have a massive jump. In my experience the city's assessed values tend to lag the true market value pretty significantly. The goal appears to use the assessed value as a means to have some graduated component to the property tax. Being a local tax, any significant jumps are seem to be avoided by design, lest it trigger angry residents showing up at town hall meetings.
With a wealth tax it can be highly variable year to year and out of one's control. If stocks go way up you're on hook for paying those taxes. Especially if you're Larry Ellison with a controlling stake in Oracle, you could find yourself in the situation of having to liquidate assets to pay taxes, thereby reducing your control of your own company.
My main objection to a wealth tax is many of its proponents see it as a means of reducing inequality and "leveling the playing field". I find these positions to come from a place of envy and reject them of those grounds. Many arguing in favor also assume that federal confiscation of wealth inherently benefits the public, as if its some benevolent charity. The reality is more mixed. There is seemingly no limit to politicians' ability squander money on nice sounding projects that give them good headlines while enriching cronies and delivering questionable actual value. It's nice to imagine that all that money is going to roads, bridges, schools, and research, but a whole lot is also going to spying on the populace, subverting foreign governments, and blowing people up.
It could be designed to be closer to property tax.
> you could find yourself in the situation of having to liquidate assets to pay taxes
Maybe. There are many other ways: the stock pays enough in dividends to cover the tax, the owner has other sources of income, the owner borrows against the stock to pay tax, and so on. In many dual-class structures the privileged class stock becomes common stock when sold so some founders could maintain control even after selling.
Private companies are trickier but still manageable. I don't want to turn this into a long post though.
> many of its proponents see it as a means of reducing inequality and "leveling the playing field".
I see it as a way to reduce income taxes. Welfare states are currently funded by income and payroll taxes aka taxes on labor. For the math to work out you need higher and higher tax rates or more and more workers. And you're fighting an uphill battle because improving productivity constantly reduces the need for workers.
Instead let improved productivity pay for the welfare state. Stop penalizing people for working by taxing them more.
Presumably it would function the same way as realized capital gains taxes (no refund on tax already paid)?
https://ourworldindata.org/grapher/income-share-top-1-before...
i.e. the US tax system is still fairly progressive despite what many people think.
What? Income deductions are only worth the marginal tax rate on that income -- ~40% on $100k of income deducted is worth ~$40k. (With the $10k SALT cap, he can still deduct $10k, worth about $4k.) The top bracket being reduced from 40% to 37%, and starting at a higher income threshold, likely saved the same high earner more than $36k.
Actually it makes sense based on what income can be reliably taxed. Impossible to verify how much that person actually tipped, so better write $0 on the tax form. As someone else wrote, that only punishes honest people.
I immediately assumed it was a clear overture to people who are very financially literate and who were expecting within minutes an email from their tax lawyer to explain how payment for their activity happen to quality for a very loose definition of tips. At least the part that wasn’t already tax-free thanks to international montages, blind trusts and creative reporting.
People already vastly underreport their tips. This just codifies it in to law. I’m not saying it’s right but I also doubt it’s hitting the IRS’s coffers especially hard.
Logically, it would make sense to me to make it dependent on how much of your income comes from tips. It doesn’t really make sense that wait staff shouldn’t pay taxes on their tips, as it’s basically just their income but paid by third parties. When I was doing wedding photography and someone gave me a tip on top of my normal fee, that feels more like a gift than my income. It was fairly rare and was nowhere near the majority of my income. That, logically, shouldn’t be tipped as long as other gifts aren’t.
But that would be complicated, so here we are.
So buskers have to declare their tips, but servers don't?
Like "No Tips".
Pay your employees, pay your taxes.
No nonsense on dividing tips between people that I did not interact with, minimum tipping, or with automated machines.
Tipping also means that if I want to know how much I'll spend in your restaurant I will have to decide how much I tip even before I walk in.
This is all just tax evasion with extra steps, enabling exploiting of people that have less contractual power.
Japan?
Japanese people are offended, so don’t do it there. People in other places tend to be flattered, so you can, occasionally. But the idea that you should pay your employees a living wage has been a well established principle since the 19th century.
Now that I have given up on that battle I do scale my tip for how good the service is.
In my area, the min wage is somewhere around $15/hr. Anything less than 20% tip on top of that $15/hr is considered stingy. The restaurants that do a service charge instead of tipping add 22% and sometimes a 4% fee to pay for employee health insurance.
Anymore, we really only dine out for special occasions or a monthly visit to our favorite spot.
If tipped employees are just earning that standard minimum wage and nobody tips them, then they just get the minimum wage. I can see situations where they'd be pretty mad -- there are a lot of restaurants where tipped employees make more than the standard minimum wage.
All of that said, I believe that tipping is horseshit and should go away. But I can't protest it by refusing to tip unless I want to punish the wrong people.
It is true that in some contexts, a good waiter elevates the experience. But in most restaurants the waiter adds nothing to my experience. If anything they're a hindrance. So I'm very much in favor of forced tip sharing with the people who actually made the food I enjoyed.
Absolutely. As a brit used to waiters and waitresses in the UK and Europe generally leaving me alone until I ask for something, I find the constant fawning interruptions from American service staff cringe-inducing.
A refreshing aspect of US culture is the lack of a historical class system and associated cultural baggage that we have in the UK. So I find it so strange that once you step into a restaurant you are forced into this weird servant/master cosplay where you dictate the server's livelihood based on how you happen to be feeling that day and the resulting whim of your pen writing on the tip line.
And yet, in today’s America that’s the major economic policy of the leader of the Republican Party.
Conservatives like it, because it is effectively a de minimus exemption on taxes, simplifying the tax collection process, and liberals like it because it results in more progressive taxes, with tip earners overrepresented amongst low-income earners.
A few lines of tax code means millions of people don't have to worry about unpredictable withholdings due to significant changes in tips from day to day, month to month, and year to year.
Also, what's sloppy about it? It's just a deduction for up to a maximum amount from tips, for a specified list of occupations, with the maximum decreasing as income increases above a specified level. That's pretty simple, as far as tax code goes. What do you think would be a less sloppy way of implementing it?
You have too much partisanship on your mind.
Harris (Democratic party leader) endorsed it: https://www.cnn.com/2024/08/12/politics/taxes-on-tips-elimin...
Yes. And a big round of applause to welcome Mr. Zohran Mamdani.
If I'm missing something help me out.
After all, the government taking ownership of industries matches common definitions of Socialism.
> Charter of Labour, 1927
> He recognised private enterprises as the most efficient, gaining him support from rich industrialists.
> The charter also stated that the state could take control of, manage or encourage enterprises that were considered inefficient.
Parent poster's explicit "two decades back" scale is entirely reasonable for the phenomenon they are pointing out.
American hypocrisy never fails.
And US still needs to protect x86/MS as best NSA source :) There is even "intel" right in the name ! ;) Also business and best and cheap compute cpus. I guess they need a bit of help until some patents go off...
And do not forget foundry with "photonics" tech cooperating with military...
Lack of wild and dumb capitalism is not automatically socialism.
And belive me: socialism is the TRASH - replacing private ownership destroy value and sensibility of any action.
But it also expands the idea that the customer/buyer has financial power over the server by encouraging a tipping culture.
Donald Trump and his sons have repeatedly said that don't pay on contracts when they view the work is poorly done or insufficient, in response to claims of non-payment.
Encouraging tipping makes such "payment discretion" easier.
A actual far left policy would be a collectivised or cooperative workplaces that don't rely on tips to subsidies salaries.
It sounds like a win for the employee, "ah but you don't need to pay tax on your tips". But in reality it's government saying "The company you work for owes you nothing, take it from the customer".
(0) which is to say, much higher (1) a propaganda term if there ever was one. work one shift as a waiter and tell me it take no skill afterwards! (2) $2.13 barring state-level increases over the federal minimum, to satisfy the pedants
Service industries have an advantage in being short cycle interactions, so even small amounts of social gratuity can be effectively monetised. There're also much more public so other people can see our generosity / stinginess.
Even worse example would be "Why can't I tip a police officer? ;)"
When my grandpa was in the hospital towards the end of his life, the nurses let him lay in his own piss for half a day before doing anything about it. We gave them an envelope with a generous "tip", and after that they started paying much closer attention to my grandpa.
Many people give a few thousand USD cash to the midwife and the doctor after delivering their baby.
> Following the Civil War and the abolition of slavery, formerly enslaved Black workers were often relegated to service jobs (e.g., food service workers and railroad porters). However, instead of paying Black workers any wage at all, employers suggested that guests offer Black workers a small tip for their services. Thus, the use of tipping to pay a worker’s base wage, instead of as a bonus on top of employer-paid wages, became an increasingly common practice for service sector employment. In the early 20th century, these employers, who shared a common goal of keeping labor costs down and preventing worker organizing, formed the National Restaurant Association (NRA). Over the past century, the NRA has lobbied Congress to achieve these goals, first by excluding tipped occupations from minimum wage protections entirely, and later by establishing permanent subminimum wages for tipped workers (One Fair Wage 2021).
Low income digital creators can deduct upto 25k in tips, so if their income from tips and other sources is below $150k a year, their taxable income will be 25k less.
Major creators may still not get much since it's a power law distribution, but the tips thing is in no way limited to low income.
I remember something like 2k$ youtube ad revenue for 1M views, so that's like 1M video every 4 days? or was it 2M views per 1k dollars, then it's 1M video every day?
at a biweekly cadence, they'd need ~6M views per video to hit $150k with ads alone. if you figure another $0.025 per view for sponsorships, then they would need 6M views per year or about 240K per video.
looking at Patreon stats, it seems reasonable to assume that a channel with 25K subscribers could pull in about 1K Patreon subs with effort. if each is paying $5/mo, then that would add another $60K/yr in revenue (though I imagine a lot of that would get eaten up by fees and extra costs.
So would be $30k for 1M ad views.
Of course a bit apples to oranges since not all youtube videos have mandatory ads, etc.
Why should tip income not be taxed but other income should be? How is that fair? What principle makes that just?
Are bartenders and servers more deserving of avoiding taxes than cooks and janitors, for some reason?
My girlfriend works for a local chain restaurant. Some of the things she tells me about seem like they shouldn’t be legal (forcing everyone’s cash tips to be pooled with non tipped teenagers they don’t want to pay, for example. Pretty sure the company has had previous class actions against them. This was just a small local chain in a middle/upper middle class suburb.
I saw a post on Nextdoor the other day where another restaurant closed, laying off the workers without paying them for hours worked. The general consensus about how to get the money you worked for: you don’t. The state has no labor board and there was little option for recourse.
> You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return.
Which is obviously true for tips and donations. If it is a gift, then the giver owes taxes, and there is a $19k/year/recipient exclusion, so small gifts like this would always be exempt.
(Please don’t give me bullshit answers based on hundred year old economic theories just because you’re a wanna be libertarian)
The federal capital gains rates are higher than the effective tax rates paid by a family making a median income, but I suspect you are asking why the capital gains rates are not higher than the highest marginal rates.
One issue is simply that capital gains tax rates generally don't account for inflation. If you build a business over a few decades and sell it, much of the increase in value will be simply due to inflation. Do you want to encourage long term investment, or make it so only financially illiterate people do long term investments?
And if you want more progressive taxation, then support more progressive taxation. Treating classes of workers differently is not a way to get to more equitable progressive taxation.
(I do think property taxes should be a land-value tax and not include improvements you've built.)
Property law in the US and most western democracies doesn’t remotely agree with that. Land is not a communal or solely government owned resource, and the govt doesn’t ‘rent’ it out.
Note: I think this is a good thing and that property taxes are vital to our local communities well-being.