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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe federal government should tax all income no matter the source.
Can someone explain to me why an office worker should pay all their taxes on income & FICA, but a server shouldn't pay all their taxes on all of their income & no FICA taxes?
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speak easy
(12,598 posts)rather than punching down, how about those execs who shift their income into capital gains?
VMA131Marine
(5,270 posts)Very little of the server’s wage is taxable anyway if they are single. But what happens in the case of two income households (married filing jointly). Let’s assume the tipped wage is the smaller of the two incomes. In current circumstances, that would all be taxed at the highest marginal rate warranted by the combined income regardless of the source of income. By not taxing tips, two income households with a tipped worker suddenly get a huge tax break compared to all other two income households. Is that fair?
The one compromise I would consider is to make tips tax free above the Federal minimum wage (it would be too hard to do it on a state by state basis) since employers are required to “top up” tipped earners to at least the Federal minimum if their tips aren’t sufficient.
The other issues are as follows:
1/ Are tipped wages still subject to the 7.65% FICA tax? If not, is that income still counted towards earnings that will determine Social Security benefits. If it’s now not counted, tipped workers could see a substantial reduction in their Social Security benefits, but if it is counted they will get benefits for which they have contributed less that non-tipped workers with the same income.
2/ Does the employer still have to pay their portion of the FICA tax on tips? If not, it’s a huge giveaway to employers of tipped workers and might actually promote more businesses to encourage tipping.
3/ There is a huge variation in the incomes of tipped workers and therefore the higher income workers will see much larger tax breaks
4/ If tips are no longer reportable as income for federal income or payroll tax purposes then it’s going to increase the occurrence of employer wage theft and reduce the tools available to deal with it since there will be fewer records available for review.
5/ Eliminating the federal tax on tips won’t eliminate the state income taxes
yardwork
(69,364 posts)Waiters usually don't get benefits. They rarely are eligible for healthcare coverage or retirement benefits. They may not get paid time off. They don't have regular schedules. They may work 15 hours one day and six the next. Their shifts move around. They may close one day - meaning they stay past midnight, possibly - and have an early shift the next day. Their shifts aren't predictable. Arranging for childcare is almost impossible. And they don't get paid minimum wage. The voluntary tips left by randos are suppposed to make up the difference.
unblock
(56,198 posts)The way it's supposed to work is they get the reduced minimum wage from the employer and tips subsidize the difference between that ridiculously low rate and full minimum wage.
If the tip income isn't enough, the employer is legally required to make up the difference so the worker always gets at least full minimum wage.
In practice, employers may refuse, claiming the workers are hiding some tips, or threaten to fire anyone who dares exercise their legal rights.
Many problems would be solved if they were just required to pay full minimum wage in the first place.
ProudMNDemocrat
(20,897 posts)Servers make less than $2.50 an hour.
Lower waged workers are hit the hardest it seems.
unblock
(56,198 posts)As noted, the restaurant business is notorious for wage theft and while many do the right thing, I'm quite certain many don't.
ProudMNDemocrat
(20,897 posts)And we know how they feel about workers.
moose65
(3,454 posts)Right to work laws deal with unions - not minimum wage or tipped workers.
rampartd
(4,632 posts)but without health care from my "real job" that would have been impossible.
these proposals to exempt tip income are being thrown as "free stuff" to the rubes.
the gratuities that will go untaxable are the "tips" recieved by the supreme justices and such from their benefactors.
Dave says
(5,425 posts)Asking out of ignorance, not meaning to ruffle feathers.
rampartd
(4,632 posts)i worked a dive just outside the french quarter and picked a midnight shift, making my customers (and plenty of them) the waiters and bartenders who were just getting off of stressful shifts. treat 'em courteously and professionally, maybe an occasional assist in a hook up,
just don't stand between them and the tip jar.
but i never made 6 figures until my third career short selling "truth social"
doc03
(39,086 posts)tax for nearly 50 years now tax on that tax!
rampartd
(4,632 posts)social security is an entitlement for people who are no longer useful (to them), so no one cares but
capital gains are the engines of capitalism and incentives and all the usual stuff that means
capital gains are how repub donors fund the class war, and why they wage it.
Jacson6
(2,014 posts)Then SSA is taxed like all other income
doc03
(39,086 posts)have a pension, I put every cent I could into a 401K. I pay tax on my pension and my investment income, that is fine.
The tax on SS was intended to be on upper income retirees. The threshold for the tax was set in 1983 at $25,000
adjusted for inflation would be over $80,000 today. In 1983 very few retirees had to pay that tax now it is 48%
and every year that will increase basically making it a welfare program in the future. When I retired in 2010 I paid tax on a
a little over 50% Of my SS, last year I paid tax on the full 85%. In the future everyone will be paying tax on their SS even if they have no extra income. I am in the same boat with VA benefits, I served two years in the Army and can't get any benefits
because of my income. I didn't serve in a combat zone, but I know others that were on the ground in combat in Vietnam and
can't get any help either for the same reason. I know many others that never left the US and get free healthcare and drugs and some that even get a disability pension.
sarisataka
(22,695 posts)Social Security benefits, life insurance benefits, alimony payments, child support payments, welfare payments...
These are all income.
MarineCombatEngineer
(18,060 posts)
JCMach1
(29,202 posts)
Beartracks
(14,591 posts)... then officially pay me.
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MichMan
(17,151 posts)Cash tips, gambling winnings, e bay sales, crime proceeds, drug sales etc.
lapfog_1
(31,904 posts)( even millionaires ). At least not a lot of income relative to their net worth.
What they have is unrealized capital gains assets... for example stock in the companies they own. Until they sell, the pay no taxes on this money. None at all. If they do not sell for at least 1 year, they only pay capital gains on the increase in value and the tax rate is 23.8% for high net earners.
But. they don't sell their shares ( all that often ). Instead they borrow money using their stock as collateral at a bank. As much as they need for whatever they want. They have to pay interest on this loan... but it can be as little as a few percent ( say 3 percent ). They can then deduct the interest from any taxes they DO owe. They can also set a balloon payment at the end of the loan agreement which they can they roll over into a NEW loan. Lather, rinse, repeat. At some point they die... leaving the entire mess to be resolved by their heirs. Having never paid any real taxes at all.
Of course if their assets take a dive... the entire ball of wax unravels as the banks call their owns and they have to sell... but there we are only talking 24% on the sale.
The entire scheme is called "Buy, Borrow, Die" strategy to not pay almost any taxes.
Zoomie1986
(1,213 posts)Their assets, so it's a loan, not income.
moonscape
(5,722 posts)Last edited Sun Aug 11, 2024, 05:25 PM - Edit history (1)
in taxing income, or not, based on the work involved to acquire it seems like a slippery slope, fraught with abuse potential.
We need to address minimum wage for all workers, including restaurant, and taxation brackets to lift all low-income wage-earners regardless of source. But I also need to understand why not taxing tips in the service industry is a good idea.
I was surprised when I heard Kamala support this in LV.
multigraincracker
(37,651 posts)Publicans are good with low minimum wage, how about a low maximum salary?
former9thward
(33,424 posts)Hollywood actors/actresses, sports figures, everyone.
multigraincracker
(37,651 posts)higher rate. Minimum wage earners shouldn’t pay anything and millionaires should pay 90% just like when America was great in the 50s, 60s and early 70s.
MichMan
(17,151 posts)multigraincracker
(37,651 posts)Allow the same deductions they had back then, when taxes were fair. The rich have bought off Congress to rig taxes for the rich.
former9thward
(33,424 posts)The Standard deduction is $14,600. Minimum wage workers working full time would make about $14,400. So, they would not have any taxable income. No one paid the 90% rate in the years you mentioned. In those years there were many, many loopholes in the code which allowed people to pay much less.
Think. Again.
(22,456 posts)Gift tax guidelines should apply.
pat_k
(13,373 posts)But you could ease the burden to the same extent.
I think the gift tax exclusion is 15,000 or something. Instead of an exclusion, you could have a tips tax deduction. That is, report all tip income so the person pays social security tax on it, but then provide a tips deduction up to a maximum of $15,000 or so, equivalent to gift tax. Tips wouldn't be tax free -- it would be counted toward SS benefits later -- but the burden would be eased in the same way that you get to deduct half your self-employment tax to ease the burden of self-employment tax.
Think. Again.
(22,456 posts)...to avoid more of the rat's nest tax code we have.
Tips are actually gifts given at the discretion of the served. They should simply be taxed that way (unless they are a mandatory charge as some restuarants do).
pat_k
(13,373 posts)Those workers shouldn't be screwed on the SS later because their wages were artificially low due to working in a position that relies on tipping.
Think. Again.
(22,456 posts)Bev54
(13,431 posts)Think. Again.
(22,456 posts)And whatever goes on between a server and a grateful customer is none of anyone else's business.
Bev54
(13,431 posts)tips paid by credit or debit cards or a gip jar get paid out by the employer to the employee and are taxed. It depends on the employer how they handle cash tips but I always tip in cash so they can decide whether they want to declare it or not.
Think. Again.
(22,456 posts)I've heard far too many stories about businesses stealing worker's tips one way or another.
MichMan
(17,151 posts)Put a tip on a credit or debit card and they have no choice but to contribute towards their retirement
Think. Again.
(22,456 posts)MichMan
(17,151 posts)Think. Again.
(22,456 posts)pat_k
(13,373 posts). . . be a massive undertaking.
Creating a deduction as described, or something similar, that would ease the tax burden on tips for tipped workers while still reporting it as income is extremely doable and doesn't require a revamp of whole industries. And it would have the advantage of encouraging reporting of tips that would boost later SS benefits.
Bev54
(13,431 posts)pat_k
(13,373 posts)I'm not saying we can't go in that direction. I'm just saying it seems to me that getting there would be more difficult undertaking. It would wake up those that profit from lower wages to tipped workers big time. Doing something now as a first step toward easing the tax burden for tipped workers while encouraging reporting of tips to boost SS benefits later, seems to me more doable and wouldn't hit the same level of resistance.
We can work on that resistance as part of getting to a living Federal Minimum Wage done.
While taking that first step, make it clear where we need to get for true fairness. Don't stop talking about the REAL solution as we get something that helps workers in place.
Ms. Toad
(38,637 posts)Tips are income. I am not giving a person a gift when I tip them. I am doing so because our laws allow employers to pay tipped workers less than minimum wage - and if I don't leave a tip, they may be working for less than our laws deem the absolute minimum. And I resent being corrected to do so, certainly not a sentiment associated with gift giving.
Think. Again.
(22,456 posts)...they are your expression of gratitude or dissatisfaction with the service that was provided.
Personally, I tip heavily, and in cash, with a sincere "Thank You" for the same reasons you mentioned, but I do so knowing it is my choice.
And if it is my choice to give someone something or not, that thing I give is then a gift.
Ms. Toad
(38,637 posts)Why does the employer withhold both FICA and income taxes from imputed tip income?
Why don't we just get rid of wages and prices on goods and treat all exchanges of money as gifts?
Tipping is no more an expression of MY gratitude than payment of any other bill. And because tips are not fixed, those of us who understand the wage structure and feel compelled to ensure those serving us earn at least minimum wage, disproportionately subsidize those who don't care about such things.
I tip, and I tip well, and express gratitude for good services (not only to the employee, but also to management as well. BUT I am paying for services - not making a gift.
And I resent treating one class of workers differently so that - rather than being charged a fair price that covers the cost of the food (including paying the workers involved in providing it to me), I am being undercharged - which shifts the risk of inadequate income to the employee, rather than the employer. And - especially women - still feel compelled to put on extra make-up, wear shorter skirts or shorts, lower cut tops, etc. in order to increase their tip income in order to pay their bills (or avoid getting breakfast shifts where there refusal to do so won't impact the corporate bottom line).
It is an inherently classist and misogynistic system, and it needs to be abolished - not treated differently than all other lower income workers who are, at least, have certainty as to their income.
Think. Again.
(22,456 posts)...they convinced lawmakers of the same lie you believe, and no, tipped workers should NOT have pay income taxes on the gifts from they receive from others.
It may bring the price of services down slightly, but that only means the employer will sell more because of the lower price, to make up the profit.
You've bought into the lie that employers use to cheat their workers out of a living wage.
Ms. Toad
(38,637 posts)Since I have no desire to give gifts to people who are simply doing their job.
And if you don't know how well that would go over, just read through thread here on tips - and you'll see a lot of patronizing comments about people who can't afford to tip shouldn't be going out to eat. If you really believe that you are simply making freewill "gifts" to certain workers (a waitperson) and not others (a grocery store clerk), then you've bought into the lie that certain workers are only worthy of receiving gifts, not a reliable income.
Eliminating taxes on tipped income won't impact the price of services at all. What it will do is raise the taxes on everyone (including similarly situated workers who are are paid wages, rather than tips) to cover the loss in taxes collected. It will also raise the cost of supporting the elderly as more and more people fall through the safety net as those workers who are not paying as much into SS start receiving lower SS income. My sister cannot retire, because her SS income on her reported income was not high enough to give her much SS income when she reaches the age at which she can start drawing it.
Requiring employers to pay traditionally tipped workers would raise the prices of those goods and services slightly - and I am willing to pay more, if it will eliminate the tipping system without hurting the workers. The increase in price I pay will be less than I pay now, since the amount I tip takes into account that no everyone tips, or tips well enough to ensure workers receive a reasonable pay. In other words, I'm subsidizing people who are taking advantage of the system. If the true cost of goods and services reflects all of the costs of getting it to me, it will be lower than what I pay now with tips (because it will force everyone to pay their fair share).
Think. Again.
(22,456 posts)..but you're definitely on the right track about forcing employers to pay their employees a living wage.
And yes, you're correct, by pretending the tip system is some kind of responsibility the customer carries, you are subsidizing people who are taking advantage of the system.
Ms. Toad
(38,637 posts)And who would that hurt?
My job was working with students. My employer regularly cut my staff and assigned my department more work. I've always worked at least 60 hours a week at a job that ostensibly paid me for 40. In my last job, I was working 80-100. Refusing to do the work once I hit 40 hours would mean nothing to my employer. I doubt they would even have noticed. But it would have hurt the students.
I'm not willing to punish tipped employees to prove a point to either their employers or others who are not tipping. But I'm also resent your attempt to recharacterize a social obligation that results in untaxed income as a gift, especially when doing so hurts everyone else in all of the ways I've already described.
Think. Again.
(22,456 posts)Ms. Toad
(38,637 posts)Think. Again.
(22,456 posts)Ms. Toad
(38,637 posts)And that isn't the point I was making.
When deciding to abstain from participating in a system I find offensive, I ask who that abstention will hurt. If that person (the students, in my case, or tipped employees in this conversation) doesn't have the power to change the system, I am not going to express my disgust for the system in a way that makes them bear the brunt of what they have no power to change.
Think. Again.
(22,456 posts)...as I mentioned, I tip heavily and always in cash for the same reasons as you are stating.
In fact, I would probably continue to tip even if servers WERE paid a living wage because as I said earlier, the tips I give are gifts in appreciation of good, personal service that practically every server I have had has shown to me.
If I felt that I couldn't afford the meal because of the added expense of paying workers fair, livable wages, I simply would not order it in the first place.
Ms. Toad
(38,637 posts)So it is not up the whim of third parties (the customers).
Think. Again.
(22,456 posts)Zeitghost
(4,557 posts)Are non-exempt.
Ms. Toad
(38,637 posts)And even if some are, that is completely unrelated to the point I was making.
In deciding whether to withhold tipping because I find the tipping system offensive, I engage in the same kind of evaluation I do in deciding to complete the job rather than clocking out. I ask who will be hurt by it. If the person who is hurt by it doesn't have the power to change the system, I don't take my frustration about the system out on that person.
pat_k
(13,373 posts)I don't think anyone is talking about just not reporting tips. That would be stupid because people would be screwed on social security later.
If easing the tax burden for servers and other tipped employees makes sense, and I think their are arguments because restaurants are allowed to pay tipped employees less, it wouldn't be hard to come up with a way to do it.
One option would be to simply add a "tips" deduction. All tips get reported as income, but then you have a "tips" deduction of up to $15,000 or something (whatever the current gift tax exclusion is). That way, it still counts as income for purposes of social security. You're just getting a deduction to ease the tax burden. Think of it as akin to deducting half your self-employment tax to ease the self-employment tax burden.
MichMan
(17,151 posts)A fair amount I would reckon.
pat_k
(13,373 posts)Adding a deduction as described could actually encourage more tip reporting so people could boost their SS benefits later.
yardwork
(69,364 posts)If we want servers, we need to pay them fair wages.
pat_k
(13,373 posts)I'm just saying it seems to me that getting there would be more difficult undertaking. It would wake up those that profit from lower wages to tipped workers big time. Doing something like the deduction described in previous posts to this thread now as a first step toward easing the tax burden for tipped workers while encouraging reporting of tips to boost SS benefits later, seems to me more doable and wouldn't hit the same level of resistance.
While taking that first step, make it clear where we need to get for true fairness. We can work on resistance to a fair wage for all work as part of getting to a living Federal Minimum Wage done. We should never stop talking about the REAL solution as we get things in place that help workers now.
MichMan
(17,151 posts)They could always open an IRA and make regular deposits
yardwork
(69,364 posts)MichMan
(17,151 posts)See post #29
I worked as a busboy many years ago making minimum wage. The servers would openly brag about making more in one night than I made all week and nearly all of it as far as I could tell, was pocketed tax free. One of them shared her tip with me by giving me $1. Once.
People have the option to report their income (or not) and contribute into SS or other retirement methods.
pat_k
(13,373 posts)Based on BLS
https://oysterlink.com/career/waitress/salary/
Tax on $60,000 is around $11,000 (calculator)
So, a little over $4,000 per month after tax.
Some very conservative monthly expenses here in Seattle
$1,600 rent on a studio less than 450 sq ft
$150 utilities
$75 Cell phone
$35 Wi Fi
$75 parking
$350 health insurance plus out of pocket *
$160 car insurance
$200 gas
$400 groceries
$100 clothing
$50 household and personal care
------------
$3,195
So, if a person earning at the top 90th percentile doesn't have kids, spends nothing on entertainment or eating out, doesn't have a pet, doesn't buy coffee out, doesn't drink alcohol, doesn't have a car loan or lease, doesn't have credit card debt to service, doesn't put any money into savings for emergencies, they could conceivably put $9,600 a year into an IRA and save about $150 per month in taxes.
Perhaps not a struggle, per se, but certainly damn difficult -- and one emergency away from falling behind.
As for people in the 75th percentile down ($41,600 or $2950 per month after tax, I think it is fair to say they are struggling.
*healthy 35 yo with subsidy based on $60,000. For someone older with a chronic condition this is $1000 per month with a plan that has $6000 out of pocket max.
MichMan
(17,151 posts)It's not just about servers and tips, but every other occupation. $100, 000 pre tax income for everyone working 40 hours a week.
Seattle (or any other locale) could pass that tomorrow if they had the desire.
pat_k
(13,373 posts)... unwillingness to stand as proud advocates for the sweeping changes that flow from our values.
Not a direct answer to you, but I think something I replied to another post is relevant here:
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=19321667
pat_k
(13,373 posts)pat_k
(13,373 posts)"discretionary" income -- not that saving for retirement shouldn't be an absolute necessity. I haven't investigated, but I'd guess that most are at 60% or less of area median income and therefore are only earning enough to cover (or not quite cover) rent, health insurance, car insurance, gas, food, and other necessitates.
On edit:
Some actual numbers here:
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=19321405
Ms. Toad
(38,637 posts)We need to address the underlying problems associated with low-paying jobs, not create a special status for one sub-group.
pat_k
(13,373 posts)See answer to another poster on this:
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=19320408
Ms. Toad
(38,637 posts)It perpetuates the small pie world - the one in which there is a limited pie for which all workers must fight the others. When you address a vocal sub-group and give them a reward you aren't giving others (1) they get quiet because what is given can be taken away making (2) decreasing the number of individuals in the remaining portion of the group who don't have as much power to demand a fair solution for all.
Just look at how one-off solutions for medical care are working.
Reconstruction for breast cancer is (by law) medically necessary.
When I was diagnosed with breast cancer, every physician treating me made sure to point out that even though I had a single small lump in one breast, I was entitled to have insurance pay for "reconstruction" not just on the impacted breast - but also on the other breast so that they matched.
When I was diagnosed with a similarly sized sarcoma on my right forearm, leaving me with an oval divot, covered by a skin graft, measuring 1.5" x 2.5" x .5" deep, not a single surgeon mention reconstrucion - because it is considered cosmetic surgery. Despite the fact that it is much more obvious than the barely noticeable scar and indentation from removing the breast cancer.
And, to some extent even worse, if you want an aesthetic flat closure (making the breast removal more aesthetically pleasing - but flat rather than a more "womanly" shape - that is cosmetic surgery.)
But rather than creating a law that deemed reconstruction for all cancer (or medically related) disfigurement medically necessary, Congress catered to the loud, "sexy" voice. I am not aware of any efforts to address the underlying issue: that medically necessary surgery can leave people with disfiguring scars which can make emotional healing much more difficult - regardless of the cause of the medically necessary injury.
That was decades ago. It happened again, more recently, with capping insulin costs - while leaving people like my daughter (whose billed medical expenses - much of it for medicine run to $200,000 each and every year) or my spouse (whose diabetic medication costs $300-500 every 3 months) out in the cold.
We have to stop creating one-off benefits for one sub-group, because it diminishes the chances of a larger solution for all who share the same issue.
And to do this with tips is worse, because not only does it remove the voices of the large body of tipped employees from those agitating for a change, it leaves the rest of us with (ultimately) higher taxes to pay the taxes of those no longer paying taxes on a substantial portion of their income - AND - it will also be a drain on the safety net as more of them retire and are receiving a much lower SS payment because payments are based on income.
pat_k
(13,373 posts)... is the idea that implementing bandaids or baby steps is somehow at odds with proudly advocating for the sweeping changes we know we need and know are doable with sufficient political will.
The problem within our party, as I see it, is that when we come up with a doable bandaid, we stop there. We don't keep making the case for the bolder, absolutely necessary, reforms. A new, new deal.
I don't see it as either/or. I think we can get through changes that help a bit right now AND can stay laser focused on making the case for things like national healthcare, living wage, basic income, an end to mass incarceration, proven public safety programs (e.g., hospital based interventions with people who have been shot has been shown to interrupt a cycle of gun violence), and on and on.
We can frame the bandaids as what they are -- bandaids only necessary because the desperately needed broader changes have been "off the table" for far too long. As a party, I think we can commit ourselves to making the case for broader goals, while also implementing whatever we can to improve lives -- even if only modestly -- within the current political landscape
Given the push back I got for what I thought was a simple proposition on this board (see thread below), it is clear we have a long way to go even within our own party.
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=19308933
Ms. Toad
(38,637 posts)Because implementing bandaids in situations like this: creating one-off solutions for a sub-group (especially for one of the most well-defined sub-groups, with a sexy/marketable story (tipped workers, breast cancer patients, insulin)) makes it much harder to generate the momentum needed for across-the-board change because of the absence of those voices.
The Affordable Care Act is an example of a bandaid that was worth implementing. It is far from a perfect solution, so it is a bandaid. What that bandaid didn't do, however, was to throw a bone to one sub-group needing access to healthcare, with the result of removing those voices from the chorus of voices demanding reform.
That contrasts sharply, as a concrete example, of the bandaid thrown to breast cancer patients - and only breast cancer patients. Sarcoma, for example, is one of the most disfiguring cancers because it is so aggressive that - if you are lucky enough to be eligible for limb-sparing surgery, you are typically left with a large scar that must be covered with a skin graft. It accounts for 2% of all cancers. Breast cancer, on the other hand, accounts for 30% of all cancers. Now that patients with breast cancer have reconstruction deemed, by law, to be medically necessary (and covered by insurance) their voices are silent on that issue and there is zero momentum to demand the same solution for other cancers.
An acceptable bandaid here would be to remove the exemption from minimum wage for tipped employees, so that all workers are paid a minimum wage by their employers and are not reliant on direct payments from customers for their living. Another reasonable bandaid would be to raise the minimum wage across the board. What I object to is crafting a solution for a single, identifiable, larger subgroup that will hurt our efforts to pass meaningful reform (not to mention actually hurting others by decreasing tax revenue that must be raised elsewhere, or by ignoring long term consequences for that group (and society) by decreasing income-based social security income down the road
pat_k
(13,373 posts)I don't see addressing specific issues as working against the case that more fundamental change is both necessary and doable. You think it does. I say advocate for big changes while moving the ball and making inroads where you can.
The problem is that we have no way of knowing the extent to which one view or the other is "right" because too few in our party are out there actually making a full-throated case for national health care, basic income, federal living wage. It is impossible to know if people who benefit from a small fix will therefore be deaf to the case for a real new, new deal because that case is not being made. As long as we limit proposals to that which is perceived as doable and are silent on bolder and more meaningful action, we will never achieve the big things.
OTOH, refusing to move the ball where we can while focusing solely on building political will for bigger things strikes me as counter productive.
Ms. Toad
(38,637 posts)Last edited Mon Aug 12, 2024, 03:21 PM - Edit history (1)
Is moving the ball forward. Yes, it helps tipped workers, who already have opportunities to avoid paying taxes on a portion of their income that other workers earning a similar income don't have (by not reporting) by formally exempting that income from taxes. But not only does this create a category of tax free income for some, but not all, low income workers - but that lost tax revenue will need to be made up somehow, and will likely result in increased taxes, including on those same low income workers who won't benefit from this proposed tax free income granted to their economic peers. And, that benefit granted now will result in lost income later, at retirement, when it will be harder for those then elderly tipped workers to supplement.
I'm not opposed to bandaids, as long as they really do move toward the ultimate goal - in a way that doesn't doesn't favor one subgroup, at the expense of others similarly situated. I've given several examples of such steps that have been, it could be taken.
pat_k
(13,373 posts)The notion I had, reporting and paying SS+Medicare on tip income, but having a deduction (with a cap) wouldn't make tips tax-free (i.e., still paying SS tax), but it would make the portion (up to the cap) free of federal tax because it is arguable that tips are a "gift" of sorts and therefore fall somewhere between regular income (taxable) and gift (don't report at all up to $15,000 or something). A deduction made more sense to me than completely exempting which I think is a terrible idea.
Perhaps my deduction notion is not a great idea, but I thought it better than completely exempting. Using the deduction approach could even encourage reporting so the worker would accumulate more toward social security.
I'm actually a "tipped worker" of sorts. I gave up IT consulting back in 2021 and started a dog walking business. Tipping is not as "traditional" as with servers, but about 20% of my customers do add a tip or give me a Christmas bonus. I add whatever "extra" they pay to the invoice with a big thank you and the new total is calculated as fee income in my system. On occasion, I've thought about not adding the tip as a tracked item because it is arguable that it really is a "gift." I haven't asked an accountant and prefer to have the higher income to boost SS, even if only a little, but anyway, since I had already had the notion of "tip" as "gift" in mind, I wasn't completely opposed to the idea of easing the tax burden on tips. Of course, unlike a lot of servers and other tipped workers working for someone else and being paid an artificially low "base fee", I set my own fees. Any tips really are gravy on the top.
MichMan
(17,151 posts)It was only benefitting those who still owed student loans while ignoring those who had paid them off, didn't go to college at all, or held other types of debt. Not to mention it is all being added to the national debt, thus obligating future taxpayers to pay for it.
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MichMan
(17,151 posts)JohnSJ
(98,883 posts)lame54
(39,771 posts)Jacson6
(2,014 posts)lame54
(39,771 posts)Jacson6
(2,014 posts)lame54
(39,771 posts)Allowance is about chores not a gift
RANDYWILDMAN
(3,163 posts)Fight over how high capital gains taxes SHOULD be(and are currently not), they should be much higher this is how the Uber rich avoid paying their share.
Also corporations have written the tax laws to never pay their share. let's change that big-time !!!!!
bucolic_frolic
(55,137 posts)The 1950s was a very progressive tax system. Probably no billionaires. Taxes were 90% at the top tier of income. The economy boomed, prosperity was shared, people were patriotic. Unlike today.
Metaphorical
(2,634 posts)a GRADUATED sales tax.
I know that this is not a popular idea, but I ask you to hear me out:
As anyone in the gig economy can tell you, income is a very complicated concept, and has spawned its own industry. The reality is that wage income being taxed takes money out of the hands of those that need it most, while simultaneously being mostly avoided by the wealthy who essentially use capital equities and bonds as collateral for loans with very low comparative interest rates.They are out the 3-5% of the loan's interest, but this is likely far less than what they would be paying if their earnings were truly taxed.
Instead, institute a sales tax on goods and services purchased. You buy stock, you pay tax on that purchase, a fairly significant tax because in general such purchased are discretionary spending. Most essential foods would be exempt, as would most clothing. In essence, you end up paying the tax at purchase rather than upon selling.
The immediate effect of this is that the prices of many goods and services go up for a little bit, but over time (probably about a year), the system begins to equalize. This would encourage thrift rather than spending, which is precisely the point - the system as it stands right now forces you to work even if you are relatively frugal, but we are increasingly facing a period where good paying jobs will be disappearing as automation (not just AI, though that's a factor too) pushes humans out of the market. The average person is able to hold onto more of what they make if they are frugal, while those that have the means to make large capital purchases (which are often treated not as personal property but corporate property with shell companies) also end up paying their FAIR share of taxes without all of the tug of war that takes place now.
An income tax made sense in 1918 when there was a need to encourage spending and discourage thrift, but demographics are now changing to where we need to encourage thrift and reduce spending, because population is approaching its peak in the US (about twenty years, by my estimates), and will start to decline thereafter. Income taxes have become counterproductive, especially with the rise of a two tier system of taxation (wage taxation vs capital gains).
moonscape
(5,722 posts)a low fixed income? Social Security is not keeping up with the cost of living, and your regressive tax proposal would be beyond painful. What about those who are disabled and unable to work? Lots of folks are already in “thrifty” survive mode.
XanaDUer2
(15,772 posts)
WarGamer
(18,613 posts)If I want to give you $10 for your extra good service... none of the gov business.
If I give the auto detailer an extra $50 because he spent a lot of extra time... ditto.
Iggo
(49,927 posts)
Captain Zero
(8,905 posts)That's a really bad look.
Unless there is an amendment in the law that all tips and gratuities to all judges are subject to a 97% tax.
JT45242
(4,043 posts)Forcing workers to be contractors is a slick way a lot of businesses weasel out of their fair share of FICA.
Plus tax stock options and buy backs