Mini Pleb Economist: No Tax on Tips? \ stacker news ~econ

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2015 sats \ 24 comments \ @SimpleStacker 21 May econ

So, the Senate has unanimously voted to pass the No Tax on Tips Act, and I think the downstream effects of this are really interesting to think about.

Essentially, it allows workers a 100% tax deduction for earnings from tips (up to a maximum). To "safeguard" against abuse, the Treasury Dept will publish a list of occupations that traditionally receives tips for which this deduction is eligible.

I predict a couple things:

Formal wages will go down. Service industries will push their employees to get paid more in tips. "Expected" tipping amounts will go up, and the nasty looks when you don't tip will increase. I'm not sure how the bill deals with mandatory "service charges". If there is no provision for that, expect more mandatory service charges.
More jobs will be squeezed to fit into whatever definition for eligibility they come up with. If it requires you to serve drinks, I expect more jobs to include serving drinks as part of their responsibility, and for more of their compensation to come in the form of tips. Personally, I hope to be able to reclassify myself as a service worker who receives my compensation in tips. I just have to find out how.
Eventually, we're gonna get complaints about bosses who refuse to raise wages because "you make more money on tips", and then workers will complain that it's resulted in more uncertainty because at least wages were certain and tips were not. Then some politician is going to use this as a rationale to raise the minimum wage again.

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30 sats \ 2 replies \ @note_bene 2h

Are you guys hanging out with the same bartenders and waitresses as me? These people are not exactly George Washington level truth tellers, especially when it comes to paying out money at tax time.

Grok tells me:

In the 1990s, the IRS estimated that up to 84% of tip income, totaling approximately $500 million annually, went unreported.

So basically it's already tax free in practice, and the amount of cost and grief the gov't needs to go through to assess and challenge these small fry earnings is extremely high. There's this plausible deniability due to pooling tips from the waiters to cooks and dishwashers "tipping out".

I'm on team "nothing ever happens" w.r.t. this bill; meaning service economy continues unchanged, ceteris paribus of course.

30 sats \ 1 reply \ @SimpleStacker OP 2h

I don't think you're looking at the big picture, which is that the government is essentially carving out a legally tax-free form of transaction. My prediction is that workers and businesses are going to squeeze as much of their economic activity into that niche of eligibility as they can.

I'm not sure how enforcement for tax on tips works, but these days most tips are paid electronically, which is probably harder to evade than cash tips which was more common in the 90s.

30 sats \ 0 replies \ @note_bene 2h

You might be right on the big picture...I'm not there

Looking at the small picture, I'm assuming there will something like box 65b where you'll declare your total income from tips. Basically incentivizing people to fully to even over report.

Thinking more about this, I think a lot of individuals will attempt to roll "grey economy" stuff into box 65b. Because the IRS has always loves to go after people declaring $8k yearly earnings who bought a new BMW.

In essence the gov't is buying a valuable economic survey with by giving "qualified immunity" on a debt they've rarely ever been able to collect well anyways.

190 sats \ 2 replies \ @Undisciplined 21 May

Nice predictions. I especially like the one about dirty looks for not tipping.

32 sats \ 1 reply \ @SimpleStacker OP 21 May

Hey, so now you won't have to pay taxes for all the tips you receive on SN and for your pod, right? ;)

30 sats \ 0 replies \ @Undisciplined 23h

That's right! Although, I think we're well below the reporting threshold for gifts.

280 sats \ 2 replies \ @guerratotal 23h

This is what happens when a decaying system tries to patch a sinking ship with duct tape. Instead of admitting that the very structure of wage labor is broken, they toss crumbs disguised as "relief"—while quietly engineering more dependence, more precarity, and more manipulation of the working class.

Let's be clear: a tax exemption on tips isn't generosity — it's an admission that the fiat system is failing. They're basically saying: "Hey, our currency is so devalued, and our tax system so parasitic, that we now have to let you survive... but only if you hustle harder for unpredictable scraps."

It’s a psychological trick. Shift the burden of dignity from the employer to the customer. From stable income to voluntary charity. From wages to tips. They convert labor into a gamble. And the house always wins.

First they inflate away your savings. Then they tax your wages. Now, they turn your income into something optional — subject to social pressure, awkward eye contact, and passive-aggressive tablet screens flashing “20%, 25%, or 30%?”

This isn’t a bug. It’s the feature of a system designed to extract until there’s nothing left.

The truth? A sovereign individual doesn’t wait for crumbs. A sovereign individual opts out. Hard money. Permissionless systems. Bitcoin. No middleman. No gatekeepers. No Treasury Department deciding who qualifies as a “real worker.”

This law isn’t progress. It’s the symptom of collapse.

Tick tock.

5 sats \ 0 replies \ @kepford 22h

Yep, well said.

5 sats \ 0 replies \ @SimpleStacker OP 23h

Amen brother

41 sats \ 4 replies \ @Satosora 21 May

Im not a fan of the tipping culture now. People that make bubble tea expect to be tipped. Coffee baristas, too. Even if l only order a black coffee. I feel that a lot has changed since covid.

25 sats \ 3 replies \ @SimpleStacker OP 21 May

Expect the tipping culture to get more intense after this bill.

35 sats \ 2 replies \ @Satosora 21 May

I feel this might stop people from eating or drinking out all together.

20 sats \ 1 reply \ @SimpleStacker OP 21 May

It's possible. Now that I think about it, I'd prefer "100% tax on tips" over "No tax on tips", because I want to get rid of tipping culture altogether.

35 sats \ 0 replies \ @Satosora 21 May

I dont think tipping is bad when it is earned, but it should never be expected.

60 sats \ 1 reply \ @teemupleb 19h

As if the tipping culture wasn’t getting out of hand in the US anyway..

Ordering a coffee from the counter standing up and the screen asks:

“Do you want to tip 50%, 60%, or 70%?”

5 sats \ 0 replies \ @SimpleStacker OP 19h

"That will be $1 for your coffee. Now would you like to add 500%, 600%, or 700% tip?"

46 sats \ 1 reply \ @Aardvark 21 May

They can look at me dirty all they want. I've survived on tips before, and the lesson my boss drilled into my head is that I'm not entitled to tips at all, so be thankful for anything you get.

16 sats \ 0 replies \ @kepford 22h

Yeah, I worked a job with tips and my mentality was not what I see today.

Also it was all cash and I didn't report any of it.

30 sats \ 1 reply \ @Signal312 22h

So...on a lot of platforms (for instance, Gumroad, where you can sell digital content), you can also request a tip.

That kind of tip is now tax free? Or doesn't that count in the list of occupations?

0 sats \ 0 replies \ @SimpleStacker OP 20h

Who knows! This is gonna be a clusterf*** for sure.

30 sats \ 0 replies \ @wolfsbane 20h

Like a setup employers shift pay to tips, workers lose stability, and the cycle ends with another political “fix" Clever move.

0 sats \ 0 replies \ @wolfsbane 11h

A win for workers now But maybe short term, Long term lower wages, tip pressure, and more chaos in the margins.

0 sats \ 0 replies \ @2053456d48 13h

In reality I am not a great fan of tipping but I find great pleasure depending on the service someone provide and be happy to provide extra tips if I feel like. Though I think it's a great news for someone who is receiving the tip without and deduction and paying taxes on that.

0 sats \ 0 replies \ @Alice_and_the_Wonderland 16h

the Treasury Dept will publish a list of occupations that traditionally receives tips for which this deduction is eligible.

Will zapping to contents be considered tipping?? Just curious