6 ms·
If there is no tax on tips, what is to stop me as an independent contractor from charging $1.00 for all my services, and agreeing with a client that they'll jus
by kogus 2y ago
If there is no tax on tips, what is to stop me as an independent contractor from charging $1.00 for all my services, and agreeing with a client that they'll just write in the "real" balance in the "gratuity" line that suddenly appeared on their invoice? Income is income. It should all be taxed the same. Which is to say, as little as possible.
- fumeux_fume 2y agoThe article cited that it would come with limits and restrictions to prevent people from abusing it.
- iscrewyou 2y agoI presume if you are caught, the IRS or the court will hold you in the wrong for fraud and tax evasion. Because they get to interpret the law, not you.
- JumpCrisscross 2y ago> presume if you are caught, the IRS or the court will hold you in the wrong for fraud and tax evasion What is the difference between a discretionary bonus and a tip? What if I add a tip line to my business invoices? The best solution is an income and deduction limit, e.g. you can't claim if you earn more then 2x median wage ($85,600 [1]) and/or the deduction is capped at the greater of $10,000 and 20% of your AGI. Without an income deduction, I assure you, I will figure out how to get tipped. [1] https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_median_wage_and_mean_wage https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ...
- quantified 2y agoSo many receipts have a tip line already, why not?
- treebeard901 2y agoThis is the same Justice System that recently ruled a gratitutiy for a Judge after a ruling isn't a form of bribery or corruption. So your mileage may vary.
- rayiner 2y agoThey didn’t do that. They ruled that gratuities and bribes are two different kinds of corruption that require different proof and are made illegal under different laws. For example, this helpful primer on the “differences between the offense of bribery and the offense of accepting a gratuity” was last updated in 1998: https://www.justice.gov/archives/jm/criminal-resource-manual-2043-comparison-elements-crimes-bribery-and-gratuities https://www.justice.gov/archives/jm/criminal-resource-manual... You should consider reading legal news that doesn’t lie to your face.
- treebeard901 2y agoSeems odd to attack my news sources, as if you know which ones I use instead of the argument itself. Under no circumstance should a Judge accept money from anyone even remotely involved in any case. It doesn't matter what they call it after.
- AnthonyMouse 2y ago> The best solution is an income and deduction limit You don't have to help them try to make it make sense, it isn't intended to make sense. A completely sensible proposal is to lower taxes on the middle class. But that's also entirely uncontroversial and furthermore they repeatedly say it and then don't do it so no one believes them and therefore no one pays attention to them if they say that. "No tax on tips" gets people excited because a) there are a lot of service workers (which is the point; that's a lot of votes) and b) anybody can see that it's a tax loophole so large that even non-service workers can concoct a way to get in on it, but c) they haven't heard it before and it sounds like the kind of thing that could pass, because it won't cost the government too much revenue if the only people getting it would be a couple of waitresses and they themselves who will, unlike other people, come up with an ingenious plan to use this to avoid paying taxes anymore. In other words, it's a silly proposal with extremely high memetic fitness. Don't try to fix it, just realize that what working people actually want you to do is lower their taxes.
- JumpCrisscross 2y ago> there are a lot of service workers (which is the point; that's a lot of votes) Specifically, Nevada.
- twoodfin 2y agoThe income tax burden on the middle class has been dropping for decades under tax policies across administrations of both parties, from an effective 19.1% in 1979 to 13% in the last pre-COVID year of 2019: https://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households https://www.taxpolicycenter.org/statistics/historical-averag...
- AnthonyMouse 2y agoNot quite. That link is doing something weird and including the corporate tax rates to arrive at "total" tax rates. The median total of individual and payroll tax rates by those tables was 16% in 1979 and 11.4% in 2019. But even that isn't right because it apparently isn't counting the so-called "employer contribution" of FICA for people who aren't self-employed: https://www.ssa.gov/oact/progdata/taxRates.html https://www.ssa.gov/oact/progdata/taxRates.html Using those numbers for the payroll tax rates, the median combined rate was 19.66% in 1979 and 17.7% in 2019. And this is slightly overestimating the rate in 1979 because the self-employed payroll tax was less than the combined employer+employee rate in 1979. So there hasn't been a significant reduction in 40 years, and the rate on small businesses has actually increased. But that's not all. The start of that table was a high point. The median effective tax rate in 1950 was 5.5%: https://www.irs.gov/pub/irs-soi/80inintravmatr.pdf https://www.irs.gov/pub/irs-soi/80inintravmatr.pdf That probably doesn't include FICA, but FICA in 1950 was only 1.5%/3% (and again less than the combined rate for self-employed back then), so the median federal effective tax rate would have been <8.5% in 1950 compared to 17.7% in 2019. And 1950 isn't even the low point, it's just the earliest number in that document. The federal government dramatically raised taxes on the middle class in the early to mid 20th century and they've been stuck there since.
- blitzar 2y agoThe 20% performance fee in the 2 and 20 for hedge fund managers can easily become a tip on their tax returns, but I dont expect they will be back at the table asking what they did so wrong that would deserve such a paltry tip.
- basch 2y agoI personally would love for the world NOT to move towards MORE tipping, which a tax exemption would encourage. Wouldn't it make more sense to bump standard deduction to $85,600. If someone is making more than $85,600, they pay taxes whether its tips or not.
- 486sx33 2y agoNo, because the entire point of a tip is to reward great service What we should be doing is tipping better for great service and tipping less or not at all for poor service!
- basch 2y agoYou tip the person who pours you a drip coffee or a tap beer, but not the person who lugs an 80lb box to your doorstep. Would you advocate eliminating the $1 handing someone a cup tip, because it is expected service and not "above and beyond?"
- deafpolygon 2y agoUnless you're wealthy, in which case you can hold the IRS hostage for as long as you want until they drop the case.
- pas 2y agoare you referring to a particular case?
- trothamel 2y agoDisallowing tips from corporations seems like it could go a long way to curbing abuses.
- adgjlsfhk1 2y agoHow does that work with a person on a business trip reimbursing their lunch while traveling?
- trothamel 2y agoEither you or the company pays tax on the tip portion of the reimbursement.
- JumpCrisscross 2y ago> Either you or the company pays tax on the tip portion of the reimbursement Who tracks this? Either it's unenforceable or you lose Nevada because you de facto banned tax-exempt tipping on business meals.
- gav 2y agoI imagine that it would be along the lines of: If you are a service worker earning less than $44,725 (the Federal 12% bracket) your first $10,000 of tips are tax free. This would mean that an income of $40,000 including $10,000 tips would owe roughly $1,748 Federal tax vs. $2,820 tax.
- kurthr 2y agoWhich means that almost all tips would be taxed. Most tipped workers make over 30% of their income in tips, and certainly the highest tipped workers that pay the most taxes do. That makes not taxing the first 25% of tipped income which would only be taxed at or less than 12% has a very marginal effect. Plenty of bar tenders make >$100k/yr with <$30k in non-tip income. Taxing "only" $60k+ of their $70k in tip income looks pretty silly. You're going to save them at most $1200 when their taxes are already well over $12k. I just don't get why one would want to promote tipping culture with financial incentives, when it's already fairly exploitative of the workers.
- LorenPechtel 2y agoAnd what exactly constitutes "service worker"?? Because a lot of professional stuff is considered service occupations.
- notepad0x90 2y agoI don't understand your last sentence, why as little as possible? is it better for the country to grow ever more deeper into debt or for politicians to get funding for their promises by appeasing billionaires and CEOs? it is just as important to pay taxes as it is to vote. I would even say the more taxes you pay, the more invested in politics and civic responsibilities you would become. Excessive taxation is bad but I have never seen anywhere near excessive taxation in the US. The general ailments and downtrends in American society started right around the time when taxation (especially the corporate kind) started getting cut and we moved away from the gold standard for our money. For once I'd like to see a politician promise to raise taxes and use that revenue to fix things and actually win. Perverse financial incentives are ruining everything.
- cscurmudgeon 2y agoUS has a lot of public spending fraud and wastage. Just a few examples 1. San Jose Failed To Adequately Track $300 Million In Homelessness Spending https://sd15.senate.ca.gov/news/mercury-news-audit-san-jose-failed-adequately-track-300-million-homelessness-spending https://sd15.senate.ca.gov/news/mercury-news-audit-san-jose-.... 2. U.N. Has Flown More Than $2.9 Billion in Cash to Afghanistan Since the Taliban Seized Power, Diverting U.S. Funds https://www.propublica.org/article/united-nations-cash-afghanistan-following-taliban-takeover https://www.propublica.org/article/united-nations-cash-afgha... 3. California put hundreds of millions of homelessness dollars at risk because of its “disorganized” and “chaotic” anti-fraud policies, according to a critical federal audit released today. https://calmatters.org/housing/homelessness/2024/08/hud-hcd-audit/ https://calmatters.org/housing/homelessness/2024/08/hud-hcd-... > For once I'd like to see a politician promise to raise taxes and use that revenue to fix things and actually win. Perverse financial incentives are ruining everything. No. We should vote for no more new taxes (not a single cent more) till we audit at all levels of government and find out how much fraud and waste is there and have a plan to fix it. Anything else would be illogical.
- aidenn0 2y agoThe deficit is about 1.5T annually. You'd have to find a missing $3B 500 times per year to make that up.
- Teever 2y ago> A self-made entrepreneur, Kahre, 48, paid his workers in gold and silver coin, and said they could go by the coins' face value -- rather than the much higher market value of their precious metal content -- for federal tax purposes. He did not withhold taxes from their wages, and he provided the same payroll system to 35 outside clients, which were other local businesses. https://www.reviewjournal.com/news/employers-gold-silver-payroll-standard-may-bring-hard-time/ https://www.reviewjournal.com/news/employers-gold-silver-pay...
- deleted 2y ago[deleted]
- munchler 2y agoSo if they pay you $1 for your services and decline to tip you, are you OK having no legal recourse?
- JumpCrisscross 2y ago> if they pay you $1 for your services and decline to tip you, are you OK having no legal recourse? Plenty of third-world business arrangements work like this. The problem is it incentivises extrajudicial enforcement.
- gota 2y agoI can sort of see the articles "Gen Alpha introduces: "tip first""
- LorenPechtel 2y agoAnd you don't hire you next time around. In any sort of ongoing relationship not tipping appropriately wouldn't work.
- standardUser 2y agoIf you have a compelling reason to believe that "income should all be taxed the same", I'd like to hear it. An easily solvable loophole is not compelling.
- zeroonetwothree 2y agoHaving income taxed different encourages evasion/fraud, distorts economic activity, and raises compliance costs
- AnthonyMouse 2y agoThe notion of having graduated rates is also from an era when the government operated very differently. Once upon a time, quite a long time ago, most government spending was public services, e.g. roads and constables and teachers. Government assistance was not a major expenditure. Maybe they would have operated a homeless shelter but there were no food stamps, no social security, no EITC. Then you were faced with the government needing to pay the constable but if you took the money from someone who was already close to starvation, they would starve, so the proposal comes to take more of the money from doctors and lawyers. Okay, sure, so make the marginal rates lower on the poor then. Progressive rate structure. Then we added food stamps and all the rest of it. Now, most of these programs would be better as cash, but either way they have phase outs so you're not giving food stamps to Jeff Bezos. Except that phase outs and marginal tax rates are really the same thing. So we built a whole complicated system to impose lower marginal tax rates on lower income people, and then a separate whole complicated system to impose means testing and phase outs for government benefits, and these systems cancel out because one of them lowers the marginal tax rate of lower income people and the other one raises it. This is dumb. Get rid of both complicated systems, make the benefits simple unconditional cash and then use a uniform tax rate.
- imtringued 2y agoI don't see how this is easily solvable. Whatever tipping cap you introduce will get maxed out, even in situations where tipping didn't use to be the norm. Zero tax is a lot less than any finite tax. Also, even if you close the loophole in the law, enforcing it is a nightmare, since the tax office needs to process every single tip now, otherwise someone could slip a few thousand dollar tips through the gaps in enforcement.
- tux1968 2y agoYears ago (1991) in Canada, there was a massive change to the sales tax structure. It was quite convoluted, where things like 1 donut incurred tax, but a dozen had no tax. Potatoes had no sales tax, but of course, GST was levied on car sales. Several large car dealerships immediately advertised that they were no longer selling cars, but expensive potatoes. If you bought a $12,000 potato from them (no tax), they'd throw in a free car. You can imagine how long the government put up with that.
- maerF0x0 2y agoThose might be the most honest salesmen of all time... Yeah it's only $12k, but it is a potato. :grin:
- pcthrowaway 2y agoI've bought a lemon from a car dealership, but I guess those are taxable.
- b0r3datw0rk 2y ago"As president, she would work with Congress to craft a proposal that comes with an income limit and with strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways to try to take advantage of the policy," the official, who isn't authorized by the campaign to speak publicly, said. "Vice President Harris would push for the proposal alongside an increase in the minimum wage."
- h_tbob 2y agoThe interesting thing about law is that all they have to do is make a jury think you were “not paying your fair share”. It’s amazing how well that argument works!
- figassis 2y agoMaybe in in person transactions. It usually tips are processed specifically as tips by platforms and processors and there are fraud rules against tips being more than a certain percentage of the sale. Even the card networks might reject or mark your transactions as suspicious and increase your processing fees. The same I think happens in person.
- t0bia_s 2y agoWhy exactly should income be taxed?
- robnado 2y agoAgreed. Only land should be taxed: https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism.
- weebull 2y agoI know an American won't understand this, but you can choose not to pay a tip. If you've invoiced me $1 it's perfectly legal for me to pay you $1.