You don’t like being asked to tip people everywhere you go. Polls are clear about that.
But if former President Donald Trump is reelected and keeps a promise he made recently in Las Vegas, you might have to do a whole lot more of it.
A poll by the Deseret News and the Hinckley Institute of Politics last year found that people don’t mind tipping at restaurants, but 65% said it wasn’t appropriate at fast-food restaurants and 69% didn’t find it appropriate for takeout food.
But this goes way beyond food. I recently bought a shirt online and was asked if I wanted to add a tip to show appreciation to the designer.
Uh, no thanks. Unless, that is, you want to tip me for writing this.
Today, the ubiquitous electronic screens, offering you various options for percentages to add to your bill, seem to pop up everywhere. That’s why Trump’s promise seemed so odd.
Speaking to a campaign crowd in Las Vegas, one presumably made up mostly of service-sector workers, the former president said, “For those hotel workers and people that get tips, you’re going to be very happy, because when I get to office, we are going to not charge taxes on tips. We’re going to do that right away first thing in office because it’s been a point of contention for years and years and years, and you do a great job of service.”
First of all, he couldn’t do that without Congress. But more importantly, this would unleash unintended consequences. As the old saying goes, if you want more of something, tax it less. Make tips tax-free, and watch as more of the economy becomes tip-based.
Or, as The Wall Street Journal put it, “An auto-body shop could restrain its prices and wages and strongly encourage tipping as a way to get untaxed income to workers.”
Piano teachers will ask parents to designate a percentage before letting their children go.
Suddenly, jobs that can reasonably expect tips (an expanding category) would be valued above other low-income jobs because they would make the worker free from a lot of state and federal income taxes, as well as taxes for Social Security and Medicare.
Of course, those workers would have to find ways to dissuade customers from pressing the “no tip” button on those screens.
Come to think of it, however, consumers who hate being asked to tip may suddenly find they like the new, voluntary pick-your-own-price economy. They may also like the newfound incentive for workers to do an exceptional job in order to earn a larger gratuity.
But they won’t be happy when they watch the national debt rise even faster than it does now.
The conservative Reason Magazine admitted it sounds great to let workers keep their “earnings away from the grubby hands of the government.” But the end result would be to increase what we all owe Uncle Sam for overspending.
In 2018, the latest year for which the IRS has complete data, about 6.1 million Americans reported a combined $38 billion in income from tips, Reason said. But, unless the former president has a plan to reduce federal spending by that amount, the loss of revenue would put another hole in a federal budget that already requires money printers to work overtime.
But it’s worse than that. People would likely begin reporting much more of their income as tips, which would cost Washington even more.
No, we don’t need a tax gimmick that would further distort an overcomplicated tax structure, just as we don’t need President Joe Biden’s fixation with forgiving student loans. What we need is a clear-eyed reckoning with the tax code and runaway debt.
Recently, I reported on a study by the Penn Wharton Budget Model at the University of Pennsylvania, which estimated that when the nation’s debt reaches about 200% of its economic output, the fiscal walls will collapse around us. That’s when investors will stop believing the U.S. can pay its debts. At that point, “no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly,” the Wharton report said.
That day is about 20 years away.
We need politicians who tell it to us straight. How do we reform Social Security, cut programs and raise taxes to keep that day of reckoning from coming?
Or, better yet, maybe we need politicians who will cut their own salaries to zero and give us the option, next April, to mark on our income tax forms what sort of tip we think they have earned.