Not taxing tips won't fix the restaurant industry
because it's not actually that different from other industries with precarious workers
My introduction to the restaurant industry started when I was hired to be a hostess at a trendy spot in Manhattan. Since then, I’ve spent nine years working on and off in the restaurant industry, making my way from host to server. The pay difference between the two positions was monumental. As a host, I got paid hourly. As a server, the majority of my income came from tips.
Cash in the restaurant industry has always been a slippery thing. I’ve worked at places where undocumented workers were paid off the books. I saw coat check girls hired for a flat, sub minimum-wage fee for the night. Their real pay was the cash they took home at the end of the night. Managers brought out a zipped bank bag full of petty cash to pay them. In both cases, the IRS was none the wiser. The jobs didn’t even exist on paper. Among regular tipped employees, it’s been such common practice not to declare cash tips on your taxes that some customers still believe leaving a cash tip is preferred to using the tip line on a credit card.
With the decline of cash, all that has changed. You can fudge a cash tip—you can’t when there’s a written record of the payment. Somehow this long tradition of tax fraud in the hospitality industry is now inspiring potential policy. Earlier this month, the new presidential nominee, Vice President Kamala Harris, promised at a Las Vegas rally that she would support a plan, initially pushed by Trump, to eliminate taxes on tips for service the hospitality workers.
At my current restaurant job in Oregon where tipped employees have to be paid the minimum wage (and not the much-lower tipped sub-minimum wage used by the majority of states), this would mean a full three-quarters of my income would no longer be subject to federal taxes. Between my income as a writer and a server, I just barely have enough to pay my bills every month. The extra money would be welcome. But I still think it’s a terrible idea.
I’ve taken issue with a lot of restaurant industry traditions and policies. Before the pandemic it was common to expect employees to work while sick if they couldn’t get their shifts covered. Once, as a host during a busy New York restaurant week, I put on enough makeup to cover up a fever and went to work. I greeted guests and showed them to their table before running off to vomit. I was praised for being a good team player. A few years later, a manger asked me if I “really” couldn’t work when I called out sick with food poisoning that left me unable to leave my bathroom all day. Fewer people are expected to work sick now and when they do—at least here in Oregon—they wear a mask. But there’s still no paid sick leave for employees and that’s not the only problem facing industry workers.
All but seven states still allow employers to pay tipped employees a wage of $2.13 an hour, a policy with a racist history. Scheduling is last minute and unpredictable. I often don’t get my schedule until a few days before the week starts, making it difficult to make plans. One week I might be scheduled for five shifts—the next week, only two. Pay can be unpredictable too—one day a lunch shift might only bring a couple people into the restaurant while dinner the same night might have a hundred customers, all big spenders.
Whether as a writer or a restaurant employee, I’ve never had a job that gave me health insurance or paid into a 401k (forget matching retirement contributions). Some larger restaurant groups I worked for offered benefits to managers or corporate employees but not part-time employees, which happened to cover most front of house staff. Health insurance, which I get through the Affordable Care Act, is my largest expense after rent. Making health insurance premiums truly affordable for Americans, would help a lot more people than not taxing tips: including a majority of restaurant industry employees.
Back of house staff like line cooks and dishwashers do not get tips. Paid hourly by the restaurant, many of them already make less money than servers, bartenders, or other tipped employees like bussers and food runners (who make a smaller percentage of tips). Some restaurants have tried to eliminate tips so all employees can be paid more equally—then have trouble paying servers an hourly wage high enough to compete with what they could make elsewhere with tips.
Eliminating taxes on tips would immediately boost my income but it wouldn’t help the kitchen staff, the manager I work with who always steps in to help, or the undocumented employees I’ve worked with in the past who often juggled two or three restaurant jobs—sleeping on the subway when they rode across town. It certainly wouldn’t help people in other industries who work for minimum wage and can’t afford housing, much less saving for an emergency or retirement. It wouldn’t help childcare workers, grocery store employees, or my friends working in bookstores. Because wages have stagnated in many industries even as the cost of food, healthcare, and housing are skyrocketing, many people are struggling.
If the government wants to help everyone who works in the restaurant industry, they’d be better off making changes that help everyone: funding affordable housing programs, increasing the minimum wage, and making healthcare affordable and accessible. That’s a tip I’ll give away for free.
Notes
I’m almost done with a delightful summer of guests and visitors, all of them friends I’ve known since high school who have since spread out across the country. Even though summer weather lasts through September, the end of August always feels like a time to think about getting serious about work again after summer’s delights. Maybe we’re all just squirrels storing nuts for the winter. I’m hoping to get in a few more hikes and a couple more days at the beach, but I feel like I did a good job being in nature this summer and enjoying the beautiful Pacific Northwest!
I’m inching toward the end of my novel—still 25,000 words left to go—but am setting a goal to finish it by the end of the year. I’d like to get a full edit in before 2025 too. It’s doable but will take a lot of time!
is doing a mini #1000WordsOfSummer over Labor Day weekend. I’ve set aside time to take part in it and blocked off my calendar for the weekend. Maybe you want to join in too?Wages and housing have been especially on my mind this week because I read Evicted: Poverty and Profit in the American City last weekend. Sociologist Matthew Desmond won a Pulitzer Prize for this book about the destabilizing effects of eviction on families and how difficult it is to be poor in America. This book deserved every accolade it got. It’s a long read but incredibly well researched and put together. I couldn’t put it down. The author’s note at the end, which talks about the research Desmond conducted, is the longest I’ve ever read and a fascinating read on its own.
This week I am finishing up Ferris Jabr’s Becoming Earth (a wonderful read!) which is about the systems of life that create and sustain our planet. It’s beautiful and thought-provoking. My copy is already full of underlines and dog-eared pages.
As a little treat, I’m reading Silver Nitrate by Silvia Moreno-Garcia. I loved Mexican Gothic and have been excited to have time to read this book which combines film and the occult into a delightful horror mashup.
Because all writers have a never-ending hope of finding ways to make writing financially sustainable, I’ve opened a Bookshop.org affiliate page. If you buy any of the books I mention in this newsletter, I will get a small commission. You can always directly support my work by getting a paid subscription to A Little Detour.