PSA: the "No Tax On Tips" provision expires:
> 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).
Is that maximum $25k in tips, or in total income that includes tips?
Tips. The AGI phaseout starts at 150k (300 married).
300k before your tips start to become taxable??
What in the world is driving this very high ceiling?
Rich people are more likely to pay accountants to come up with complicated ways to exploit the tax system. If the top 5% had access to this loophole, you’d probably end up with some crazy outcome like 80% of money saved from this deduction goes to the top 5% of earners. And that would make the provision more expensive to include in tax legislation (trading off against other things like the headline tax rate). Since “no tax on tips” was a campaign promise, they probably wanted to keep the promise while setting limits to make it easier to fit into the rest of the bill.
300k isn’t what it used to be these days with inflation and cost of living. If you have kids and a house, things get expensive quickly.
That’s a typical phase-out threshold for dedications.
In tips
It's a free tax fraud for everyone! hooray!
Right on time for them to lose the next election so people blame Democrats.
It's all so cynical.
If Democrats win they could extend them
If Democrats win the presidency, they would still probably need cooperation from Republicans to get an extension through Congress, which means that there are no good options for the Dems.
I think one aspect that is understated: "No Tax on Tips" is only a deduction for the purposes of federal income tax. W-2 workers still owe FICA and other payroll taxes on such income, and similarly self-employed workers would still owe self-employment tax.
To me, a more appropriate name is "Some taxes on tips".
And most of their tax is already at the state level or FICA, so it's more like, "most taxes on tips, unless you make decent money, then you bet a break."
But that's not winning an election.
I don't like the idea of even more expectations for tips, since we're already tip-fatigued. Despite that, I'd rather have less rules and taxes and have them actually enforced than have a situation where people pocket the cash portion of their tips untaxed anyway, which only punishes honest people.
Yeah, this is going to incentivize businesses to try and make as much of their employees' pay come from tips, which means consumers will be expected to pay more tips, which is the opposite direction I want it to go.
It's pernicious. I've been to places that add "service charge" by default now to relieve tipping, then still give you the option to tip on top of that, which some people do because they think maybe the service charge isn't going to the server (in the places I've been to, it is). Tipping needs to die and it's frustrating to see it starting to proliferate in some European countries.
In Japan, the service is amazing, and you don't tip.
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%.
Happened to me once in Thailand, I was very surprised.
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
> USA is an overpriced country
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.
> I've been to places that add "service charge" by default now to relieve tipping, then still give you the option to tip on top of that, which some people do because they think maybe the service charge isn't going to the server
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.
The problem stems less from how it might have originated and more from what it results in.
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.
The most frustrating thing has been the tip prompt that happens before service has been rendered. A tip is based on service. If you haven't received the service yet, the fuck is the tip meant to reflect? That you succeeded at breathing?
Just hit the zero tip option and move on with life. If a seller can’t advertise the price sufficient to sustain their business, that is their problem.
With a small amount of sadness, this is the conclusion I'm starting to end up with. Yes I think waitresses and service workers should make more money. But tipping in the US has become opaque, expanding everywhere, and the expectations around tipping seem to be getting ratcheted up constantly. A business is not viable if customers have to pay your employees separately. I'm close to hitting the nuclear button and just defaulting to zero.
My bright line rule is that I won't tip before service is rendered. If I'm asked before, I can't judge the service, and therefore making a tip decision is impossible.
I guess the good news is now we can ask the server their marginal tax rate and reduce our tips accordingly
> since we're already tip-fatigued
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.
I do like the idea of people doing stuff for free for the public benefit and asking quietly for tips on topic with the article re: "digital creators".
Flattr - are they still around?
Edit: closed in 2023 after 14 years.
$1 subscription, but "This content is only available for my top 1,000,000 fans" ranked by tips.
I like the idea. How to implement in transparently in away you aren't always the 1,000,001 one?
Service provided by Patreon.
Oooh, I like this. Reminds me of charity auctions.
That must be where Onlyfans was inspired to emulate the business model.
So I can do a deal for $1 then ask someone to pay the other $100k in tips?
Oh nice, congrats to all US digital creators.
Nah... "Digital creator" is dream full time job so 25k / y is not so much. So tax still applies :)
I’m more concerned with no tip on taxes. Sales tax is usually in the subtotal that tip percentage are calculated on. Most POS I’ve seen do this way
Before someone is confused: POS here means “Point of Sale”, not “Piece of …”.
"no tax on tips" was a pandering move to the mostly financially-illiterate populace that still don't understand progressive tax systems. Singling out certain types of income makes no sense and is very unfair. I wouldn't be surprised if this actually ends up resulting in less tip income over the long term due to people going "wait my income is taxed but theirs isn't, why should I tip as much?"
Don't worry, no tax on tips actually phases out relatively quickly (2028) while the tax cuts enacted for the 1% are there to stay.
edit: fixed year typo
Extending the 2017 tax policies, specifically continuing the capping of SALT deductions, leads to higher taxes for high income earners. That deduction was worth $100K to a $1M/year income in a 10% State income tax state earner. Even more when you add in property taxes.
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.
> 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 numbers from your link are:
The top 1% pays 24% of Federal taxes, and the bottom 50% pays somewhere between 7% (bottom 40%) and 16% (bottom 60%).
Yes, that sounds about correct. It's a lot more than "bottom 50% pay no tax".
Also I'm unclear if that source includes only the "employee half" of the 15% FICA.
That’s a crystal clear sign that the top 1% have way too much money.
no, employees do not pay payroll tax, employers do.
I assure you we do.
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.
Additionally, removing the cap on FICA contributions would likely push Social Security back into long-term solvency, but that would be far too much of a burden on the top 1% of wage earners so it’ll never happen.
To be precise, social security maxes out at around the income of the 93 percentile of income
https://dqydj.com/income-percentile-calculator/
But that would also mean uncapping the maximum amount you are eligible for for social security.
It wouldn’t _have_ to, that’s a political decision not a mathematical requirement.
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
> But that would also mean uncapping the maximum amount you are eligible for for social security.
No? Why would it mean that?
this is roughly equivalent to saying "we don't pay import tariffs, importers do".
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.
And stores pay sales tax.
> 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.
In some states, the stores are the ones that owe the "sales" tax (which in these states are actually excise taxes that the business can pass through to the customer).
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.
> That deduction was worth $100K to a $1M/year income in a 10% State income tax state earner.
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.
You’re over mathing here - GP is simply saying that if someone lives in a 10% income tax state and makes 1m, they can deduct $100k from their income (presumably because it was never really theirs).
They specifically make the claim that the TCJA is a net negative for this hypothetical $1M earner in a 10% income tax state, and I don't think that's true.
> The bottom 50% pay no taxes and the top 1% still pay 40+% of federal taxes.
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.
Varies by year, but top 1% share of income is around 21% right now in the US:
https://ourworldindata.org/grapher/income-share-top-1-before...
i.e. the US tax system is still fairly progressive despite what many people think.
See this chart: https://media4.manhattan-institute.org/wp-content/uploads/co...
True, though it's irksome how the chart conflates "Rich" with "High taxable income."
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.
What do you think should happen to you if your house is more valuable in a year than the year before, even if you aren't selling or otherwise leaving that house?
This varies wildly depending state you live in - some states adjust property taxes for current value, some don’t (or do but with severe limits)
But do they do income-like taxes on the added value? This seems to be what people (GGP) are wanting from the increase in stock values, ie, unrealized capital gains.. which is frankly terrifying.
They increase property taxes, so yeah, you're getting taxed on a capital gain that you haven't realized yet (and won't until you...sell your house).
I know what does happen. Property taxes go up. A wealth tax by another name.
His net worth increased due to asset appreciation. Nobody physically transferred him any money and it can fall back down tomorrow. Should he get a refund if Oracle stock tanks?
Capital gains absolutely have tax implications. Just like my house rising $100K in (unrealized) value over a year.
Capital gains receive favorable treatment under US tax code but are also a realized gain by definition. That is you actually have to sell the asset and are taxed based on any profit earned.
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.
So you admit that many people do pay unrealized gains taxes on their largest asset (their house)?
That doesn't answer the question I posed. First off it conflates "high-earning" with "wealthy". Plenty of early career doctors are high earners but have a negative net worth. They pay more taxes than someone with millions in net worth but lower "income".
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.
Well, other than it's impossible for the bottom 50% of income earners to ever earn 60% of the income without weird communism in place...
Non-tip workers won't remember (or even notice) the phase-out. The damage is done and I agree it will incentivise people to tip less even after the phase-out.
2008?
> a pandering move to the mostly financially-illiterate populace
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.
> Singling out certain types of income makes no sense
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.
No tax on tips is the kind of policy you’d come up with if you were creating a caricature of the far left.
And yet, in today’s America that’s the major economic policy of the leader of the Republican Party.
In what bizzaro world would a far left party want to support the weird American fixation on relying on tipping to ensure a worker makes a decent living?
A actual far left policy would be a collectivised or cooperative workplaces that don't rely on tips to subsidies salaries.
Well, it's a very populist move and the extremes of either party will go down that road to get votes. Far right parties are generally for social programs as long as the wrong people don't get them.
Two decades back, if you told me someone wanted to dramatically raise tariffs, and have the government take a stake in Intel, I'd have assumed this was someone who labeled themselves a Socialist.
After all, the government taking ownership of industries matches common definitions of Socialism.
History didn’t begin in 1980. Tariffs and economic interventionism were founding planks of the Lincoln GOP: https://mises.org/mises-daily/awful-truth-about-republicans
Well, the "Lincoln GOP" was also generally in favor of tearing down and burning confederate flags, so I think it makes more sense to compare things over a shorter time-periods like "in living memory."
Parent poster's explicit "two decades back" scale is entirely reasonable for the phenomenon they are pointing out.
Lincoln was concerned about national unity foremost, and allowing the south to preserve its identity facilitated that after the war. It may have been the most successful reconciliation after a bitter civil war ever in history. Regardless, the economic forces shaping the nation have been shifting around but ever present since the founding. We were fighting about a central bank in 1789 and are still fighting about it today!
In contrast, tariffs and the government taking stakes in private companies reminds me of fascist Italy under Mussolini: https://www.historyfromonestudenttoanother.com/a-level/a-lev...
> 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.
The Z in Nazi is for "sozialistische" === socialist
Fascism is a brand of socialism that focuses on a hierarchical unified society for a narrow ethnic group.
The right in America is moving away from individualism to a more collectivist movement based on a set of beliefs which are mostly these days based on the opposite of what the left likes mixed with a version of Christianity that is increasingly disconnected from any of the actual gospel teachings.
The left... doesn't seem to believe in anything besides a collection of social issues favored by bored suburban teenagers wishing to be allies of other people (lacking their own problems these bored teenagers gain social standing from how much they appear to fight for other people's causes not having significant problems themselves). I don't know what the Democrats want except for me to be scared of Republicans.
There's a spectrum from individualism to collectivism and outside the extremes of both there's good people and bad people and a lot of room for "taste" instead of "right vs. wrong".
The right is implementing socialist policies and wants you to worship the leadership (which is always right and can do no wrong, by definition).
Zoomed out there's not a lot of difference between fascism and communism (as actually enacted in the real world).
Even if that were true (it isn't) that's like saying the D in DPRK stands for "Democratic", but using a word doesn't make it true. North Korea is not democratic.
Hell, even back in 1931, people knew the Nazi party was using false branding. You can see it with this anti-Hitler editorial cartoon [0], where Hitler is changing the emphasis of the party-name to schmooze up to different audiences.
Or remember that Night of the Long Knives [1] in 1934, where the Nazis murdered the "socialists."
[0] https://commons.wikimedia.org/wiki/File:Jacobus_Belsen_-_Das...
Next you’ll tell me North Korea is a democratic republic!
Socialism isn't just good or bad by default, how it is implemented is what defines its quality and morality.
Socialism isn't "what I like" and "things I don't like aren't socialism", it's a much more generic term.
The world is going to shit and instead of dying with dignity people seek strong leadership and celestial intervention.
It is a tale as old as time.
When the public institutions fail people seek authoritarianism to actually get things done.
While doing so in an awful manner, the current administration is definitely getting things done.
I primarily blame Democrats for the current situation for they have been doing just an awful job of getting anything done or standing up to opposition, they are ineffective cowards and invited the current situation with their incompetence.
> I primarily blame Democrats for the current situation for they have been doing just an awful job of getting anything done or standing up to opposition, they are ineffective cowards and invited the current situation with their incompetence.
I agree with you that Democrats have been ineffective in opposing Republican policies but I think you've come to the wrong conclusion. When someone gets robbed I don't primarily blame them for being ineffective at securing their home, I blame the person who robbed them. Why wouldn't you primarily blame Republicans for pushing bad policies instead of Democrats for being bad at blocking them?
Because we are talking about a nation and a political party covering half the population and not an individual victim of a crime the "don't blame the victim" morality does not apply.
When government is doing a terrible job it loses the consent of the people and gets overthrown, usually by monsters. This is the problem with Democrats, they think they should continue to win, that they deserve to continue to win regardless of how they perform. Because they're right it is morally correct for them to continue winning.
THAT'S NOT HOW THE WORLD WORKS.
It is historically objectively true that governments failing to address the concerns of their people are replaced, usually by authoritarian autocrats. It's a pretty straightforward mechanism.
Democratic leaders in the party corrupted the process to put Hillary Clinton and Joe Biden on the presidential ticket. Democratic leaders in Congress failed to show any leadership, failed to address any problems, failed to stand up or take any sort of action that addressed meaningful problems in this country.
They created the environment for the right to fall off a cliff into extremism.
Instead of defending democracy they sat back and watched.
You've got hundreds of millions of people in this country, extremists are always going to exist. You can't pretend that they don't exist or hope and moralize and blame them for existing when their ideas get popular.
The ideas of the extreme right got popular because the ideas of the center and the left failed to convince enough people.
When my castle falls I'm not blaming the invading army, there's always going to be a new one testing my defenses. I'm blaming the castle guards.
This isn't the case of a poor defenseless victim of a senseless crime. This is the experts who should know better falling asleep at the wheel and intentionally ignoring reality because of their selfishness and stupidity.
From outside the US the view seems more like:
1. Democrats in power could never do anything because Republicans could always block by virtue of having majority somewhere.
2. Republicans blocked everything they could, simply because the Democrats were in power.
3. Democrats then get blamed for not doing anything.
4. the current administration is getting something done, yes. Some things are down the wrong path and shouldn't be done. Some things are debatable but perhaps the right path but doing them in a stupid manner.
PS: supreme court isn't helping.
From outside the US the view looks very different:
1. In 2016 Democrats choose a candidate based solely on internal party politics rather than to win an election, get routed by Trump
2. In 2024 Democrats choose a candidate based solely on internal party politics (letting Biden run) rather than to win an election, get routed by Trump
3. In 2025 Democrats try their best to put up a candidate for New York mayor based on internal party politics rather than to win an election
Gee, wonder what the pattern is here.
> supreme court isn't helping.
Similar patten here. How did the SC end up like this? If the roles were reversed, would R have done the same as D?
> 4. the current administration is getting something done, yes. Some things are down the wrong path and shouldn't be done. Some things are debatable but perhaps the right path but doing them in a stupid manner.
You really believe that if only D currently had a majority somewhere, the current gov wouldn't be doing most of the stuff it's doing?
> The Z in Nazi is for "sozialistische" === socialist
No, it's not. Emphatically, demonstrably not.
Ignoring your other stuff about attempting to make the tired "Nazis were socialists, it's in their name, see?" argument, which is just Wolfgang-Pauli-levels of "not even wrong", the "z" in Nazi comes from the German pronunciation of "National".
Yeah, it didn't begin as a shortening, but an insult pun, which is why Hitler banned the term after gaining power.
https://chroniclesmagazine.org/society-culture/the-strange-o...
I might just not be reading correctly, but on the off chance I parsed your comment correctly, I respond to:
> The Z in Nazi is for "sozialistische" === socialist
by pointing out the Nazis were not, in fact socialist. They executed socialists and communists, but called themselves socialist in the same way the DPRK and PROC call themselves republics.
The Nazis and the Communists were different flavors of collective society based governments that put the whole ahead of the individual with a tight control over the thoughts and behaviors of people. Government, business, and industry blended together and you couldn't be in business without sharing the ideology and sharing power with the government.
"not socialism" is nonsense by people who really like socialism, nazism was just a different flavor of socialism and saying otherwise has been part of the propaganda in favor of socialists for a century.
You can be nice and have a socialist society, but it's also a lot easier to have a dictator rise to power in a socialist society because it's easier to hijack the collectivist mindset into a collective with extreme loyalty to an autocrat. You just have to make them angry and afraid.
The Intel story is hilarious considering the whining about Huawei a few years ago.
American hypocrisy never fails.
Perhaps.
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.
It was transparent vote buying, but it worked! Trump may have been the first Republican to (narrowly) win foreign-born voters: https://data.blueroseresearch.org/hubfs/2024%20Blue%20Rose%2... (page 9)
Hoover was the last Republican President. Reagan paid lip service to fiscal conservatism, but couldn’t execute on it because he had to court Catholics who had voted 70-80% Democrat in the New Deal era. Now the foreign-born population share is more than double what it was in 1980. A conservative party can win those new voters—every country has conservative parties—but it will look more like the right wing parties in Latin America or India than the Hoover GOP.
> of the leader of the Republican Party.
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...
That may have been a strategic endorsement, to keep it from becoming a campaign issue.
Correct, she stole a bad idea
It has broad bipartisan support and was one of very few policy changes promised by the Harris Walz campaign.
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.
It does nothing to simplify the tax code, and it opens up a universe of loopholes. The concept may have some merit, but the implementation is sloppy and lazy.
I think ultimately very few people really care about simplifying the tax code. The cost of a complex tax code is the $19.95-$200 cost of preparing your taxes, which everyone would gladly eat if it meant they could take advantage of tax deductions on pages 1,455, 19,210 and 245,908 of the tax code totaling > the cost of tax prep.
Simplifies tax collection process ≠ Simplifies tax code
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?
> if you were creating a caricature of the far left
Yes. And a big round of applause to welcome Mr. Zohran Mamdani.
Mamdani has not supported no-tax-on-tips.
And? He's not a caricature of the far left?
Are you reacting purely to the phrase "caricature of the far left" in a way that ignores and even goes against the rest of the post, to bring up a guy you don't like and make no other commentary?
If I'm missing something help me out.
Does the opposite movement exist?
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.
I used to try practicing no tips. I live in a state with no different tipping wage. To me that makes the argument of "they get paid nothing" impotent. But, culturally, people will perceive you as a prick for not tipping at restaurants. It's not fair and I don't like it but, that is the culture that has spread from tipping wage states.
Now that I have given up on that battle I do scale my tip for how good the service is.
Is it a state where the minimum wage is no different? Or that they require traditionally tipped wages to actually be paid fairly?
That’s the same thing.
All employees receive minimum wage regardless of whether they receive tips. Tips are not there to backfill the required wages nor can they be used for that. So this isn't the $2.13 min wage that must get to $7.25 when tips are added in.
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.
> No nonsense on dividing tips between people that I did not interact with
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.
> Does the opposite movement exist?
Japan?
Most of the world, really.
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.
I've found outside the USA they tend to be confused when I tip. Or they will look me right in the eyes and say, "American, yes?".
I've found that when I go to restaurants outside the U.S. without speaking their native tongue they often ask where I'm from. Answering that you are from the U.S. will make the servers overly friendly and then they will ask for a tip.
You expect us to tip when we visit your country, why can't we expect you to tip when you visit ours?
Sort of, but they chose to outsource instead of paying people/taxes
"No Tax On Tips" is so stupidly regressive and yet another addition to the complex tax law. Somehow we decided a waiter making 100k with tips needs more help than a stock worker at Walmart.
It isn't "no tax on tips" that's regressive, it's tips themselves. If tips are a gift, then they should be taxed as gifts are taxed. End tips and raise wages, and the taxes cease to be confusing or controversial.
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...
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?
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.
Well, this year I suppose it will be $1,583.33. That's just the gift tax exclusion ($19k this year) at work. I don't really see a problem with it. People should be able to give money to family members without penalty.
> 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.)
That survey is stupid in this context, as it include everyone 18+ as an ‘adult child’, which includes a lot of college students. There’s nothing malicious about supporting your kid in college, nor would it make any sense to tax that.
Nothing wrong with giving money to your kids in general. That income has already been taxed. If they were paying the kids for pretend work and taking a deduction for the higher-income parents, that'd be different.
> As you might expect, Generation Z adults (ages 18-28) receive more financial support from their parents than their Millennial counterparts (ages 29-44),
I mean, yeah, something like a third the former are college students! What a trash fire of an article.
Okay, so if I had some employees working jobs that are part of this, could I give them a tip? Could I give them 25000 dollars of tax free tip.
I think the tip here is defined as customer directly to employees. I'm sure an enterprising tax attorney can come up with ways to help your idea.
An employer is an employee’s customer.
As a contractor my customer pays me $2k a day. Instead they could pay me $20 a day and $1800 a day in tips. Everyone wins.
In 14 days, you hit the cap. In 75 days, you start to hit the phase out band.
of course this administration did something that help sites like only fans.
And Amazon (via Twitch).
I use "tipping" in my Hacker News app Hack. Basically users can tip an amount they pick. Would such "no tax on tips" apply to that too?
If it's free for all users, and you don't provide any benefit to those "tipping", it's already an untaxed gift in the US, if no individual gifts more than $19,000, and even then, the gift giver would pay any taxes. Tips require a customer relationship to exist.
Truly bizarre how this is playing out - was the digital creator carve out requested by the various right wing streamers that are part of Trumps’s core sycophant club? Doesn’t make any sense.
"No Tax on Tips" meant for low income taxpayers so most of the major digital creators won't qualify.
Low income digital creators can deduct upto 25k in tips, so if their income from tips and other sources is below $150k a year, their taxable income will be 25k less.
I have no measure of scale on 150k dollars a year in terms of creators scale...
I remember something like 2k$ 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?
$1 per 1000 views is a good estimate. Depends wildly on content.
I've seen that same figure for YT ad revenue alone. sponsorships can range from $0.015-0.030 per video for channels with 1k to 50k subscribers.
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.
Median single income in the US was around $45,000 in 2024. $150K is not low income. It goes to $300K if filing jointly.
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.
Generally correct, low income digital creators will benefit the most since "No Tax on Tips" will reduce their taxable income by 50% or more in comparison to someone who earns close to 150k which isn't a low income according to BLS as you pointed out.
If you look at tax brackets plus the standard deduction lowering the bracket it affects, it will be a flat or regressive change in take home income amongst the cohort until at $90K or maybe a bit more, double median income, where you can start writing off against the 22% bracket. Assuming 50% tips.
Love this. Step in the correct direction. Property Taxes are coming under fire next, and given their long racist history, it's about time.
Is it?
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?
It's not about benefitting the employees, but the employers. It's meant to push back against livable wages.
The employers already had all kinds of bizarre tricks to keep tipped workers down.
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.
Not that I'm a fan of tipping culture or the "creator" economy, but it seems like tips and donations to your favorite youtuber are obviously gifts to me? From irs.gov:
> 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.
Progress, not perfection.
Towards what? No taxes at all? That's not desirable if you want things like public schools and rule of law.
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.
Agreed. Why aren’t capital gains taxed at a higher rate than income?
(Please don’t give me bullshit answers based on hundred year old economic theories just because you’re a wanna be libertarian)
>Why aren’t capital gains taxed at a higher rate than income?
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?
Because rich people earn more from capital gains than income?
I suspect much of the attacks against property taxes aren't to right any historical wrongs, but is part of the attack against public education, since property taxes are a major source of funding.
No. It’s the idea that you’re renting your paid off home from the government. And the government gets to decide what it’s worth.
No, you're renting the physical space -- a scarce part of the commons -- from your community.
(I do think property taxes should be a land-value tax and not include improvements you've built.)
> No, you're renting the physical space -- a scarce part of the commons -- from your community.
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.
Stop paying your property taxes in the US and see how long it takes before the government forecloses. It is effectively rent under a different name. In exchange the government will protect your property ownership rights so that you don't go on vacation and find someone else now gets to claim your home since you weren't there to stop them.
Note: I think this is a good thing and that property taxes are vital to our local communities well-being.
What is you idea for how to collect revenue for government services? Import taxes?
Ideally: nothing.
Places like that exist. You should try living there, see how you like the quality of life.
I hear Somalia is a wonderful place to live if you've got a lot of money and your own army to defend it.
I can't because people wont leave me alone.
What do you mean? Who is stopping you from moving to Dubai?
