Why it matters: Typically, ideas like these are tough to turn into reality, but next year when the Trump tax cuts expire, Congress will likely pass some kind of new tax bill.
- That creates an opportunity to put new policies in place, says Brendan Duke of the Center for American Progress Action Fund.
The intrigue: Where things start to get wild is outside the restaurant industry, as Americans try to figure out ways to classify more of their income as tips. Think bankers’ bonuses or sales commissions — or even pay for a Substack writer or freelance podcaster.
- The U.S. tax code already has different rules for different kinds of income — capital gains, for example, are taxed at a lower rate than payroll income.
- When those kinds of divides happen, you create enormous incentives for people to game the system, says Howard Gleckman, a senior fellow at the Tax Policy Center.
- Those kinds of shenanigans typically happen with higher earners — think of the carried interest tax loophole, for example.
For the record: An official from the Harris campaign said the policy would include “strict requirements to prevent hedge fund managers and lawyers from structuring their compensation in ways to try to take advantage of the policy.”
- Trump’s campaign hasn’t offered much in the way of detail.
I was in London a couple months ago for my first trip to Europe. I’m still trying to figure out the economics of the pubs.
How are the servers at pubs being paid in a manner that they’re able to live in or close to London? Aren’t they paying significantly more in taxes than US workers? They all seemed very pleasant and gracious, presumably with the promise of a known paycheck. They really didn’t have much to do other than pull a tap handle. The beers were all very reasonably priced (often 10-25% less than at American bars). I wonder if these pubs are subsidized in some way to keep the prices low and the wages reasonable. How are businesses taxed in London / Europe compared to the US? Perhaps higher wage taxes and lower business taxes means employers can pay their staff more?
The experience is still living in my head as if I had visited a land in a fairytale (or could just be because London).
My point really is that local economics would likely change drastically simply by making this one change. I know a lot of bartenders and servers - they make far more on tips than if they were paid a living wage. I don’t know one person who would prefer an hourly wage. There’s so many pieces to the puzzle that I’m not able to jot down right now but I wonder if the US could maintain the number of restaurants and bars it has if it were to shift servers to a salary.