Serious question: why add a "service charge" instead of just adjusting the price of dishes accordingly?
Under the current system, so much gratuity is left unreported/underreported due to cash tipping. Business owners have no incentive to keep track of employee tips paid in cash; otherwise, they would be required to pay payroll taxes on the tips going into their employees' pockets. This is changing, as more and more transactions are conducted via credit instead of cash, so tracking is easier.
Under a service charge model, everything would have to be tracked and reported, resulting in a higher tax burden to the business owner. In the food service industry where profit margins are thin and reputations can be shattered overnight, it's tough to find a comfortable space between tax law, ethical employment practices, and keeping your business afloat.
Ultimately, it means more taxes for the government, primarily from people who dine out a lot.
They give you an artificially low price and then expect you, under social pressure, to give a little more through tip or service charge.
The changes are frequent, too. Since they're so localized, they're often heavily involved in local politics. Recently my city was very divided over a half-cent tax hike to build a better high school.
It would be interesting to see a survey of what it takes to change the rate in various states.
In other States, like WA for example, sales tax is a composite of jurisdictions: State, County or City, Special Tax Jurisdiction.
There is a graphical representation of Tax Jurisidictions in the US: http://www.taxrates.com/calculator/
Note: I work for the company.
I remember walking into a McDonalds somewhere in the US deserts, and ordering three mcchickens off the $1 menu. A cheap way to get lots of biomass when travelling on a shoestring. "Certainly sir, that'll be $3.24". But it's 3 items... off the $1 menu... which should be $3. I honestly think that half the hot air around taxes in the US is because the mechanisms for actually handling them are irritating. Lots of loose change, ridiculously complex tax environments for accountants, inability to know beforehand the final price of something...
Back here in Australia, if something costs $5, that's it. It doesn't matter to you whose cut goes where. You want the object, it's $5. Not $5.40, discoverable later in the chain. The tax in this system is less opaque, because it's right there, included in the price. It's not something that suprises you at the end as an irritating thing making the process more complex.
In any case, when you buy something, no-one complains that the retailer made 20%, the distributors made 30%, and the wholesaler made 40%. People only whine about they government's 10%. Most people are utterly clueless about which business parties get what sort of cut (witness the endless complaints about online app stores 'stealing' 30%...), so why should specifying how much the government makes be special? If your receipt instead told you how much the wholesaler made, or your system added on the wholesaler cut after the sticker price, everyone would be complaining about those greedy wholesalers.
And, as others have said, sales tax certainly has accountability. Australia's GST has been 10% since it was introduced in the mid-90s (replacing a confusing hodge-podge of existing sales taxes). It hasn't changed, and the political parties fear changing it because it is a huge political negative to do so.
In the US if you go out for dinner and order the caesar salad (listed at $6), the skirt steak (listed at $15), and a glass of the house red (listed at $8) you will be presented a bill for $29 + sales tax, in NYC for example the bill would come to $31.58. Then you will be expected to leave between 15% and 20% on top of that as a tip, so generally you would be expected to pay $36-$38 for that meal.
For example, in Massachusetts, the sales tax on most products is 6.25% so when purchasing most things you must multiply by 1.0625 to figure out how much it will cost. Most uncooked food does not have sales tax, but food served by restaurants does.
When eating at a restaurant, you're supposed to tip 15-20% on the total bill pre-tax, though a lot of people tip on the post-tax price depending on how cheap/generous they are. Many restaurants calculate the tip for you, but certainly not most.
I'm not for worshiping everything Europe does, but this is the way it should work.
EDIT: if you fail to tip a driver, it's unlikely that there will be consequences for you. Failing to tip at a restaurant you frequent could affect your service in the future.
If I don't feel the service is good, I pay less. But this means, I will not be able to get better service ever again.
Tipping should be a reward, an incentive. I'm not the employer. Waiter/waitress is not on my payroll, I should not be the one thinking about their take home pay.