The Tip Trap: Senate’s New Proposal Could Backfire on Workers

U.S. Senate votes unanimously to end tax on tips—Hallelujah! Well, maybe not. Quick research reveals many reasons why “no tax on tips” will harm more workers than it helps.

One of the chief reasons why this is a terrible idea is that “it could encourage harmful employer practices and lead to tip requests in virtually every consumer transaction. “ Wait a minute! Even more tip requests?  I don’t think anyone wants that. And why can’t employers just pay their employees a fair wage and make the cost of their good or service transparent?

Still think this is a good idea? Federal law only requires that employees “customarily and regularly receive more than $30 a month in tips” for their employers to classify them as tipped employees and pay them as little as $2.13 an hour.

Some workplace payday lenders that call themselves earned wage advance services have taken tipping to an even darker place. A recent class action lawsuit against EarnIn describes how they  use tipping to trick the people who use their service. EarnIn uses a host of deceptive tactics to pressure and confuse its users into agreeing to pay “tips”…this charge does not go to workers… it is a revenue source for the company. EarnIn offers different tip amounts and makes it appear that you have no option to avoid tipping and even for those that manage to see past this deceptive presentation, they make it difficult to avoid paying a tip. Do we want more of this type of behavior in our marketplace?

There are so many other ways our legislators could be helping working people

• Raise the minimum wage and eliminate the subminimum wages for farmworkers and tipped employees
• Improve the child tax credit
• Improve the earned income tax credit

Poverty is a policy choice. Let’s choose policies that end poverty not perpetuate it.

— by Jay Speer, Esq.