On Taxes, Tips, and Overtime

            In my family, April is birthday month. For many Americans, April is most notable for Tax Day on April 15. I trust you slogged through the needlessly complicated process of completing your returns, and I hope you’re happy with your refund. It may not seem like a cause for celebration, but most Americans accept that paying their taxes is the price of citizenship and do so willingly. The most glaring exceptions are the ultra-rich.

            The current administration launched a media blitz this month designed to distract attention from the massive tax cuts in the One Big Betrayal Bill that benefit corporations and the wealthy. They sought instead to focus attention on the deductions for income from tips and overtime. Maybe you saw the stunt at the White House with the woman from Arkansas who was brought in to deliver the Mad King’s order from McDonald’s and thank him for her tax break.

            Those breaks are limited to people who made enough income to have a tax liability and who are employed in covered occupations, and they phase out at high incomes. And there’s only so much you can deduct. Still, I assume people who received the benefit were happy about it. Maybe they’re happy enough that they don’t care that Elon Musk paid nothing.

            I want to take a step back though and think about the big picture. Is it good for the economy that so many people rely on tips and overtime? Because when it comes right down to it, this new tax provision creates an incentive to increase that kind of work.

            Tipping has always involved a fundamental tension. Do you tip as a reward for good service, or do you tip as a needed supplement to a miserable wage? If your DoorDash delivery takes an hour and a half, are you a mean person if you don’t give a good tip? If the barista is slow and surly, is it just the honest truth that the job sucks, and they deserve our sympathy? The fact that I can even imagine these situations shows how the tipping economy has mushroomed, as we’re now asked to tip workers whose jobs hardly existed a few years ago.

            At some point it seems like tipping becomes just another hidden fee. Instead of a tip jar that is there at the customer’s discretion, you’re faced with a screen that gives you a set of percentages for choosing how much to tip. Or even more obviously, the tip is included on your bill automatically. How much of this has become an excuse for paying workers poorly? Instead of giving tipped workers a break on their taxes, let’s play them a living wage.

            As for overtime, how often do workers put in overtime because they love their jobs so much they hate to leave, as opposed to their employer not hiring enough workers to get the job done in a timely manner? Okay, that’s a rhetorical question. We hear about the importance of maintaining a work/life balance, but what are we really doing about it? And what about the workers who don’t get overtime pay but instead work two or three jobs to make ends meet?

            In short, the tax code is a lousy way to fix structural problems in the economy. If it was less complicated, the biggest change would likely come from closing the loopholes that let corporations and the wealthy avoid paying their fair share.

Paul Harris