Is this a good idea or just the product of a competitive election season?

That sounds cute—it’s even alliterative—but ultimately it’s pretty irrelevant. Only about three to four percent of workers actually work for tips. And only a third of them make enough to pay federal taxes.

Now it seems like more workers are getting tips because we deal with that part of the workforce all the time, right? Every time we go out to get a coffee or get a haircut, we’re going to run into a situation where someone is asking for a tip.

Overall, however, the abolition of the tip tax affects only a relatively small percentage of employees and the population.

But people who work for tips must like this suggestion, right?

If I were someone who worked for tips, I would probably think it was a great idea. We all want to pay less taxes and have more money.

But if you think you’re constantly being asked for tips now, I’m afraid a policy like this would make it worse. Because if I didn’t have to pay taxes on tips, everyone would want to earn tips. It would be free money.

And I assume employers would like to pass the burden of paying their employees on to customers?

Yes, this policy would encourage employers to establish systems to provide tips to employees.

And it would be easy to deviate from the original policy objectives, because what is a tip but a bonus? Think of all the people who get bonuses at the end of the year. Sometimes these bonuses are very large and the biggest bonuses often go to investment bankers and people in the financial industry.

I think a fairly savvy accountant could convert a bonus into a tip for tax purposes.

Is there a special reason to give a tax credit to employees who receive tips?

Sometimes the government uses taxes to make certain activities more attractive or affordable. There are tax credits for mortgage interest rate reductions because we want to make it easier for people to own a home. The government allows tax deductions for charitable donations. These are activities that we as a society consider important enough to support through the tax code.

However, there is no real reason why the government should give tax advantages to tipped jobs over jobs that provide valuable services and for which there are no tips. If we want to support low-income workers or people in the service sector, there are much more efficient ways to do it.

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