Only in a presidential election year would both major candidates be supporting a fiscal policy of no tax on tips.
I understand why this excites people in the industry and our associations.
But I’m not one of those people .
I get it. When we’re trying to attract employees, exploring every possibility makes sense. We have all seen the trend lines that show the workforce we need and the workforce available – and the gap between them turning into a chasm.
I don’t think a policy of no tax on tips, if it ever moves through to next year’s tax package (whichever party has control), will help you.
Three Things You Do Not Want to See
Not to go all political on you, but the government does not exist to decide which job functions pay income tax and which don’t.
- The day your servers and bartenders stop paying tax on tips, your cooks (and everyone else) will sit you down and say, “I need a raise. I have to pay taxes, and the servers and bartenders I work with don’t.”
- That same day, your guests – the ones who pay taxes on all their income – will start tipping less and resenting your tipped employees.
- The day Congress becomes serious about no tax on tips (if they ever do) is the day you come one day closer to the end of the tip credit, as a “trade off.” The tip credit is hard to defend because of the difficulty of explaining it to people. And critically important to our random business model where we pay most of our employees, but some receive pay directly from our guests.
I’ve always thought policy should differentiate between servers and bartenders who are highly paid (I have worked with plenty of them who make six figures) and the ones who just get by. That’s another reason we have a progressive income tax.
Support Childcare Instead
If you really want to support something to increase your access to talented restaurant workers, think about childcare policy instead of a policy of no tax on tips.
I never thought I would type these words, but The Texas Restaurant Association (TRA) is a nationally recognized childcare advocate, and they’re working toward childcare subsidies through an employer/employee/government partnership. Shout-out to TRA President and CEO Emily Williams Knight.
In partnership with other industries, TRA started the Employers for Child Care Task Force.
The people who work in your restaurants rely on childcare to let them come to work. You pay them and they pay their childcare providers, borrow a family member or neighbor, or do whatever they can. This ordeal takes a lot of energy and money.
I work with my clients to enroll employees and create companies where people want to work and want to stay. Employee availability and retention directly influence guest count and revenue – and increasing guest count must be your main focus today.
Childcare, not a “no tax on tips” policy, can really move us there. So support that.
