September 17, 2024
National Restaurant Association Statement on the Introduction of the TIPS Act
Washington, D.C. – Today, Sean Kennedy, executive vice president for Public Policy at the National Restaurant Association, released a statement on the introduction of the TIPS Act, which would end taxes on tips but also eliminate the tipped wage for servers and bartenders.
The Tipped Income Protection and Support (TIPS) Act seeks to eliminate taxes on tips but unnecessarily connects a tax issue with the elimination of the tip wage. The Association supports sensible, bipartisan legislation, like the No Tax on Tips Act, that would provide tipped workers an income tax credit for their tips. However, while both issues impact tipped servers and bartenders, one is a tax credit that would put money in their pockets, while the elimination of the tip wage would damage their earning potential and take money from them.
“Eliminating the tip credit is a misguided plan that has been rejected in 16 cities and states this year alone because servers and restaurant owners joined together to actively oppose it. They told their stories of how the tip credit enables their successes and demanded the proposals to be rejected.
“The elimination of the tip credit is a lose-lose-lose proposal for restaurant owners, tipped workers, and customers alike. It will limit the earning potential of servers; it will force operators to cut hours and jobs; and it will increase menu prices for consumers. And every tipped worker in a restaurant is already making at least the minimum wage. In fact, the median hourly income of tipped servers is $27.
“That’s the reason people choose tipped restaurant jobs – they know the economics are in their favor. Suggesting that eliminating the tip credit is better for all servers and bartenders, isn’t listening to severs and bartenders.”
The tipped income system often comes under fire because there is widespread misunderstanding about how it works.
Every tipped restaurant employee already earns at least their state’s minimum wage.
This amount is paid partly by the operator and partly by tips. Any time a server does not earn enough tips to equal at least the minimum hourly wage, by law the restaurant operator must pay the balance. National Restaurant Association research found that fullservice restaurant worker incomes average between $19.00 – $41.50 per hour with a median of $27.00 per hour, far surpassing the state minimum wages across the country.
The Employment Policies Institute (EPI) recently released a study conducted by University of California-Irvine economists, that finds eliminating the tip wage doesn’t have any discernible impact on eliminating earnings gaps between minority, female, and white male employees.
The tip wage provides operators with the financial flexibility to hire more workers and control menu prices in a challenging economic environment while simultaneously increasing servers’ earning potential. Operators and tipped employees have worked to preserve this system of tipping because it is mutually beneficial.
Restaurant operators should have the option to pick the compensation model that works best for their small business, including the federal tip wage. On average, small business restaurants across the country run on a thin 3%–5% pre-tax margin. The elimination of the tip wage shifts more labor costs to operators, in some cases $10-$13 per hour more, at a time when they are already being impacted by increased food prices and higher labor costs induced by market demand. This has added to the inflation felt by every U.S. consumer and forced increases in menu prices or new surcharges.
The National Restaurant Association’s chief economist recently looked at broad-based cost increases in the current economic climate that are having significant impacts on most small business restaurants. Read the analysis here.
The Tipped Income Protection and Support (TIPS) Act seeks to eliminate taxes on tips but unnecessarily connects a tax issue with the elimination of the tip wage. The Association supports sensible, bipartisan legislation, like the No Tax on Tips Act, that would provide tipped workers an income tax credit for their tips. However, while both issues impact tipped servers and bartenders, one is a tax credit that would put money in their pockets, while the elimination of the tip wage would damage their earning potential and take money from them.
“Eliminating the tip credit is a misguided plan that has been rejected in 16 cities and states this year alone because servers and restaurant owners joined together to actively oppose it. They told their stories of how the tip credit enables their successes and demanded the proposals to be rejected.
“The elimination of the tip credit is a lose-lose-lose proposal for restaurant owners, tipped workers, and customers alike. It will limit the earning potential of servers; it will force operators to cut hours and jobs; and it will increase menu prices for consumers. And every tipped worker in a restaurant is already making at least the minimum wage. In fact, the median hourly income of tipped servers is $27.
“That’s the reason people choose tipped restaurant jobs – they know the economics are in their favor. Suggesting that eliminating the tip credit is better for all servers and bartenders, isn’t listening to severs and bartenders.”
The tipped income system often comes under fire because there is widespread misunderstanding about how it works.
Every tipped restaurant employee already earns at least their state’s minimum wage.
This amount is paid partly by the operator and partly by tips. Any time a server does not earn enough tips to equal at least the minimum hourly wage, by law the restaurant operator must pay the balance. National Restaurant Association research found that fullservice restaurant worker incomes average between $19.00 – $41.50 per hour with a median of $27.00 per hour, far surpassing the state minimum wages across the country.
The Employment Policies Institute (EPI) recently released a study conducted by University of California-Irvine economists, that finds eliminating the tip wage doesn’t have any discernible impact on eliminating earnings gaps between minority, female, and white male employees.
The tip wage provides operators with the financial flexibility to hire more workers and control menu prices in a challenging economic environment while simultaneously increasing servers’ earning potential. Operators and tipped employees have worked to preserve this system of tipping because it is mutually beneficial.
Restaurant operators should have the option to pick the compensation model that works best for their small business, including the federal tip wage. On average, small business restaurants across the country run on a thin 3%–5% pre-tax margin. The elimination of the tip wage shifts more labor costs to operators, in some cases $10-$13 per hour more, at a time when they are already being impacted by increased food prices and higher labor costs induced by market demand. This has added to the inflation felt by every U.S. consumer and forced increases in menu prices or new surcharges.
The National Restaurant Association’s chief economist recently looked at broad-based cost increases in the current economic climate that are having significant impacts on most small business restaurants. Read the analysis here.
About the National Restaurant Association
Founded in 1919, the National Restaurant Association is the leading business association for the restaurant industry, which comprises more than 1 million restaurant and foodservice outlets and a workforce of 15.5 million employees. Together with 52 State Associations, we are a network of professional organizations dedicated to serving every restaurant through advocacy, education, and food safety. We sponsor the industry's largest trade show (National Restaurant Association Show); leading food safety training and certification program (ServSafe); unique career-building high school program (the NRAEF's ProStart). For more information, visit Restaurant.org and find @WeRRestaurants on Twitter, Facebook and YouTube.