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Part of it is the waitstaff avoiding tax on tips, the other part is that it allows the business to avoid payroll tax on the majority of waitstaff's earnings. In
by dpiers 8y ago
Part of it is the waitstaff avoiding tax on tips, the other part is that it allows the business to avoid payroll tax on the majority of waitstaff's earnings. In order to get a waiter to an effective $10/hr after-tax income you'd have to pay $15-16/hr versus $2+$8 in tips.
- beatgammit 8y agoThat doesn't make any sense. Who's paying 37% taxes as a waiter/waitress? Even before Trump's tax cut, wait staff would still likely be in the 10-15% bracket, and you'd add on 12.5% FICA taxes. And this is after deductions, so effective tax rate will be much lower. Unless your state has 20+% income tax, there's no way a waitress is paying 35%. Corporate taxes don't factor in either because they are only on profit over and above all expenses. Increasing wages of an employee and shifting payment from tips to w2 income merely ensures the employee pays the taxes they should've be paying in the first place and will not increase corporate taxes. If wait staff shifted to higher wages, the employer would increase prices and could note on the menu that tipping is not necessary, but appreciated. If that was the case, I would still tip, but only for above average service.