Hot (+ spicy) tips
“‘No tax on tips’ is an industry plant” — The New Yorker
Inspired by recent news and reported coverage, here’s another look — in five parts — at how the entrenched practice of tipping is legislated and supported and what it means for the future of restaurants.
I.
A blistering report from the New Yorker this week takes aim at the National Restaurant Association1 and other groups and legislators working to defend the restaurant-tipping status quo. It provides one of the clearest (and potentially most damning) looks into how the power and connections of a century-old organization could be keeping restaurant workers underpaid.
The piece also underscores the complex dynamics behind restaurant work, from government intervention to corporate interests and workers’ unions, that are shaping the future of the industry.
tl;dr: Tipping is still complicated. (But you should read it.)
Read: ‘No tax on tips’ is an industry plant — The New Yorker
II.
During the 2024 presidential campaign, candidates from both major parties notably agreed — they agreed! — on at least one proposed policy: eliminating taxes on tips. Taken at face value, it was an idea we could all get behind: More money for service workers! Yay!
But the reality of ‘no tax on tips’ — which is now the law of the land thanks to the budget bill President Trump signed on July 4 — is much more complicated. Almost immediately after the proposal gained traction last year, reports emerged that, actually, many tipped workers didn’t make enough money to pay federal income tax. Additionally, opponents argued that exempting tips from federal taxation — a move packaged as worker-friendly — would instead benefit big business, including hotel and restaurant chains. These companies could keep worker pay low, opponents said, relying instead on newly tax-free tips provided by customers to compensate employees.
That offers a deeper benefit for employers, who in many states can pay tipped workers less than standard minimum wages. This is called the “tipped minimum wage” or “subminimum wage” or, confusingly, “the tip credit2,” and it refers to a lowered hourly rate — as low as $2.13 per hour in some states — paid to tipped workers.
III.
The NRA3 is a national lobbying group that represents the interests of restaurants, not their workers. Media outlets including the New York Times and Eater have reported on the org’s work and priorities as its power and influence have grown.
According to the New Yorker’s reporting, the group is “uniquely powerful” thanks to the businesses it represents. Everyone — including elected officials — loves restaurants. Everyone patronizes restaurants. And no one wants to piss restaurant owners off. That and, as one source told the New Yorker, the NRA “is very good at politics.”