The entrepreneurs could hardly imagine their ears. Within a couple of days each Presidential candidates approved a policy that may solve one in every of their biggest problems and price them nothing.
When former President Donald Trump and Vice President Kamala Harris proposed eliminating the tip tax, they saw it as a straightforward strategy to give their employees a well-deserved raise. Assets I spoke to several business owners whose employees receive a part of their wages as suggestions. All of them welcomed the initiative, saying that their employees would profit from it.
“I may be a unicorn here, but I care about my employees making as much money as possible and improving their livelihoods and the lives of their families,” said Carl Sobocinski, founder and president of Table 301 Restaurant Group, which owns five restaurants in Greenville, SC.
Chris Stephens, who handles PR for his wife Maria’s Boston-based tour guide company, Boston Hidden Gems, said they’re enthusiastic about what this might mean for his or her guides, who he estimates earn between 20 and 30 percent of their salary in suggestions. “We would love it for our staff because it would mean more money in their pocket,” he said.
At Sobocinski’s restaurants, many of the waiters’ income comes from suggestions. Sobocinski and his chief financial officer, Richard Vogt, have crunched the numbers and estimated that waiters could save a median of 16 to 19 percent in taxes if the rule were to enter effect. At his restaurants, the common waiter, who makes about $48,000 a yr, of which $41,000 is suggestions, would save $6,600 in taxes, he said. AssetsMeanwhile, the highest-paid waiters, who earn $81,000 a yr and get $69,000 in suggestions, would take home a further $13,000 a yr, based on Vogt’s calculations.
Although the policy proposal was intended to profit employees, it will also profit firms themselves, based on Keith Hall, a labor economist at George Mason University’s Mercatus Center. “Anything related to taxing workers is borne by both the employee and the employer,” Hall said.
Entrepreneurs could offer higher real wages without incurring any additional costs – a proposal that is especially attractive within the catering industry, where margins are extremely thin.
“For me as a business owner, it’s a win-win situation,” said David Viana, co-owner and executive chef of Heirloom Kitchen, a restaurant in Old Bridge, NJ
According to Hall, this might give employers an incentive to convert a bigger portion of their employees’ salaries into suggestions. On the one hand, because employees want this, and alternatively, since it would scale back their very own payroll and the payroll taxes that firms should pay.
Viana, Sobocinski and Stephens all said they don’t have any plans to vary the way in which they compensate their employees, but they acknowledged that suggestions would turn out to be far more attractive. Still, they stressed the importance of accelerating their employees’ take-home pay given the rising cost of living.
Restaurants “are the last bastion of people in this country who have a chance at a middle-income income,” Viana said. “In my opinion, the jobs that offer a living wage are dying out.”
Eliminating the tip tax would make an industry known for exertions more attractive, Viana added. “It’s another way for an industry that has a bad reputation in many ways – because of the way we treat our employees, because we can’t provide them with health insurance and things like that – to put more money in individual people’s pockets.”
Stephens, the tour guide, saw one scenario wherein the policy could backfire: People saw it as an excuse to tip less. “From the customer’s perspective, the point of tipping in general is to support the specific person or group you’re giving. If you as a customer can spend less and still give the same amount, then why wouldn’t you do just that?” he said.
