No matter where you land on the political spectrum, it seems one thing New Yorkers can agree on is that tipping culture has gotten out of control, permeating every corner of the service and retail industries, from coffee shops to grocery stores and self-checkout lines. And now it has become a hot-button issue of the 2024 presidential election.
Ahead of the presidential debate tonight, Tuesday, September 10, rising prices and the shifting conversation around tipping has led to both Donald Trump and Kamala Harris proposing a policy to exclude tips from federal income tax. The Trump campaign has stressed it on the platform, but has not yet released the details of its plan. The Harris campaign says it may exempt tips from income tax only for those making less than $75,000 a year, according to the Washington Post.
Today, many diners don’t know how to navigate, or even think about, tipping. In an edition of the New York Times “The Daily” podcast from late last month, co-host Ben Casselman reveals his own tipping anxiety to co-host Sabrina Tavernise: “You see these tip screens in places you never would have tipped before… if I click ‘No Tip,’ am I a bad person?”
When it comes to tipping, “It’s emotional. It’s cultural,” the Daily hosts point out. “And right now, we have no idea what [the] norms are.” So it’s no surprise that tipping has become a lightning rod in this year’s presidential election, as tips — and their ongoing role in essentially subsidizing wages — are causing new tensions.
The issue is as polarizing as anything else when it comes to politics, even when candidates agree. “This plan will create resentment between the front and back of the house in my workplace,” says Ned Baldwin, owner of Houseman in Hudson Square. “In this plan, cooks will pay taxes on their income but the servers, largely, will not. The plan seems arbitrary and unfair to the restaurant as a whole.”
No tax on tips “is not the way to do it,” argues Baldwin. “We need to establish a new set of rules.”
Over at vegetarian tasting menu spot Dirt Candy on the Lower East Side, chef and owner Amanda Cohen is one of the few who have maintained a no-tipping policy — in her case, since 2015.
“No tax on tips would, in theory, be great for servers and owners,” she says. “But it’s so complicated.” She notes that for American consumers who hate tipping, “they’re likely not going to be as generous,” with no tax on tips, dialing back on the standard 20 percent that was normalized during the pandemic, “because they’ll know servers would be getting more.”
Cohen agrees with Baldwin that “you cannot have that huge gap [in earnings] between the front and the back of the house.” But recruiting managers in this scenario “would be impossible,” she says. “Who would want to get promoted from serving if their income was suddenly taxed?”
The head of the city’s hospitality alliance — which primarily represents owners— supports the policy. “It’s welcome news that both presidential candidates support the no tax on tips policy,” Andrew Rigie, executive director of New York City Hospitality Alliance, told Eater. “No tax on tips is effectively an additional wage increase for servers that doesn’t pose the same threat and consequences for jobs and restaurants like eliminating the tip credit does.”
As to the schism in earnings between cooks and servers, he says, “There’s already a disparity of wages between front-of-the-house and back-of-the-house workers because the latter is prohibited from participating in a restaurant’s tip pool in New York, which should be changed.”
How the law would affect workers would differ according to state tipping laws. The federally mandated tipped minimum wage is $2.13 an hour; for New York City it’s a $5.35 tip credit for a combined cash and tipped wage of $16.
Representing workers, New York-based One Fair Wage told Eater the organization is “agnostic” about the policy. “Service workers who rely on tips should at least get minimum wage with tips on top,” a spokesperson said. The group points to Harris’s platform released on Monday instead calls for the end of “subminimum wages for tipped workers and people with disabilities” in what’s looking like a new proposal.
Economists generally think no tax on tips is unwise. “I think you’d be really hard-pressed to find a professional economist who would say that this policy is well designed,” Vanessa Williamson, of the Urban Brookings Tax Policy Center told the Wall Street Journal. “Experts warn this policy could help employers more than workers, increase the federal budget deficit, and even accelerate the tipping culture,” the Journal reports. The Committee for a Responsible Federal Budget estimates the plan could cost up to $250 billion.
Casselman of the Times notes that more employers may flip to tipping if this were to go through. “If you think you hate tipping now,” says Casselman, “if these proposals go through, you’re going to see so much more tipping,” he said, citing retail outlets, gas stations, and grocery stores.
“What you do is reduce the pressure to raise wages,” says Williamson to the WSJ. “It would push more of the responsibility for paying people for the work they do onto the customers directly rather than the employers who are supposed to be footing those bills.”
