Tom Kovach
Kill the Tip Tax
Federal Budget should not balance on a serving tray
By Tom Kovach
Most people working as servers in restaurants are young. So, they don't know that, prior to 23 years ago, tips were never taxed. How did they become taxed? That was some legislative sleight-of-hand by the very group that claims to be all about helping the little guy: the Democratic Party.
In order to satisfy their bloodlust for budgetary spending, the Democrat-controlled Congress passed the "Balanced Budget Act of 1984." Included in that massive shopping list of new taxes was a tax on tips that restaurant servers earn. I remember the new tax well. I was in the Air Force at the time, and one of my buddies was married to a waitress. Back when the minimum wage was still less than four dollars per hour, she was making a hundred dollars per night in tips. (She was good looking ... and she worked hard.) All of a sudden, she had to start filling out forms and reporting how much she had been tipped. It would be an understatement to say that she was not happy.
enforced "fairness"
In the wacky world of Left-wing policy, it would be unfair not to tax tips. Why? Simple. If tips were not taxed, then people that work hard and have positive people skills would make more money than people that don't. That, in turn, would make crass, lazy, mediocre people feel ... uncomfortable. (That is a recurring theme of talk-radio giant Phil Valentine.) If you thought I was going to say that it would be unfair because of the idea of a "fair share" of the taxes, think again. Democrats want a graduated tax system, which punishes achievement. There is nothing "fair" about taxing the so-called "fair share" at a higher rate than everyone else.
When I ran for Congress in New York in 1994, and in Tennessee in 2006, I told everyone that, if elected, one of my goals was to hunt down the Tip Tax and kill it. I truly believe that to be a noble goal. A tip is a type of de facto contract between a server and a customer. The better the service, the higher the tip. Thus, a percentage-based Tip Tax actually taxes good performers more, because they make more in tips proportionate to their ticket sales. In other words, the crass and lazy servers get a tax break for being crass and lazy. That's something that only a serious Left-winger could even conceive, much less implement. I believe that it's none of the government's business how much of a tip I give to a server.
who benefits?
Does anyone actually benefit from the Tip Tax? Sadly, the answer is "yes." Three groups of people benefit. The first is the horde of tax accountants that charge employers a fee to advise them because the IRS Tax Code is so complex. If the government went to a flat tax, then those hordes of accountants would need to get jobs waiting on tables themselves. (Hmmmm...!) The second group handles the paperwork (and, sometimes, the money) to collect the Tip Tax. The third group is that of the Left-wing, big-government aficionados that want to keep the little guy down — while purporting to "help" him — so that they will always think of government as "the Beginning and the End" of all things. (Sadly, that group seems to have largely succeeded.)
Before the Democrats caused tips to become taxed, the standard tip rate was ten percent. But, if tips are taxed at ten percent of ticket sales, and if people tip their server at ten percent of their ticket, then the server gets nothing. And, under the Tip Tax, anyone that does not tip their server at least ten percent is essentially reaching into their pocket and stealing. People that put the tip on their bank card when paying the bill are dooming the server, because now the government has a record of exactly how much the server was tipped. (Servers cannot make a living if they actually report all of their tips, as the government expects. For that reason, I never put the tip on my card. It's always cash on the table, or face-to-face.) To overcome these problems, many restaurants automatically add 15 to 22 percent "gratuity" onto the total bill. (And, when that happens, how many people reach into their pocket and actually give the server a personal tip?) If the Tip Tax were repealed, all of these frustrations would go away immediately.
There is one more reason to repeal the Tip Tax. It's just plain wrong!
© Tom Kovach
Most people working as servers in restaurants are young. So, they don't know that, prior to 23 years ago, tips were never taxed. How did they become taxed? That was some legislative sleight-of-hand by the very group that claims to be all about helping the little guy: the Democratic Party.
In order to satisfy their bloodlust for budgetary spending, the Democrat-controlled Congress passed the "Balanced Budget Act of 1984." Included in that massive shopping list of new taxes was a tax on tips that restaurant servers earn. I remember the new tax well. I was in the Air Force at the time, and one of my buddies was married to a waitress. Back when the minimum wage was still less than four dollars per hour, she was making a hundred dollars per night in tips. (She was good looking ... and she worked hard.) All of a sudden, she had to start filling out forms and reporting how much she had been tipped. It would be an understatement to say that she was not happy.
enforced "fairness"
In the wacky world of Left-wing policy, it would be unfair not to tax tips. Why? Simple. If tips were not taxed, then people that work hard and have positive people skills would make more money than people that don't. That, in turn, would make crass, lazy, mediocre people feel ... uncomfortable. (That is a recurring theme of talk-radio giant Phil Valentine.) If you thought I was going to say that it would be unfair because of the idea of a "fair share" of the taxes, think again. Democrats want a graduated tax system, which punishes achievement. There is nothing "fair" about taxing the so-called "fair share" at a higher rate than everyone else.
When I ran for Congress in New York in 1994, and in Tennessee in 2006, I told everyone that, if elected, one of my goals was to hunt down the Tip Tax and kill it. I truly believe that to be a noble goal. A tip is a type of de facto contract between a server and a customer. The better the service, the higher the tip. Thus, a percentage-based Tip Tax actually taxes good performers more, because they make more in tips proportionate to their ticket sales. In other words, the crass and lazy servers get a tax break for being crass and lazy. That's something that only a serious Left-winger could even conceive, much less implement. I believe that it's none of the government's business how much of a tip I give to a server.
who benefits?
Does anyone actually benefit from the Tip Tax? Sadly, the answer is "yes." Three groups of people benefit. The first is the horde of tax accountants that charge employers a fee to advise them because the IRS Tax Code is so complex. If the government went to a flat tax, then those hordes of accountants would need to get jobs waiting on tables themselves. (Hmmmm...!) The second group handles the paperwork (and, sometimes, the money) to collect the Tip Tax. The third group is that of the Left-wing, big-government aficionados that want to keep the little guy down — while purporting to "help" him — so that they will always think of government as "the Beginning and the End" of all things. (Sadly, that group seems to have largely succeeded.)
Before the Democrats caused tips to become taxed, the standard tip rate was ten percent. But, if tips are taxed at ten percent of ticket sales, and if people tip their server at ten percent of their ticket, then the server gets nothing. And, under the Tip Tax, anyone that does not tip their server at least ten percent is essentially reaching into their pocket and stealing. People that put the tip on their bank card when paying the bill are dooming the server, because now the government has a record of exactly how much the server was tipped. (Servers cannot make a living if they actually report all of their tips, as the government expects. For that reason, I never put the tip on my card. It's always cash on the table, or face-to-face.) To overcome these problems, many restaurants automatically add 15 to 22 percent "gratuity" onto the total bill. (And, when that happens, how many people reach into their pocket and actually give the server a personal tip?) If the Tip Tax were repealed, all of these frustrations would go away immediately.
There is one more reason to repeal the Tip Tax. It's just plain wrong!
© Tom Kovach
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