Ted Cruz Introduces Bill to Exempt Tips From Federal Income Tax

Ted Cruz Introduces Bill to Exempt Tips From Federal Income Tax

Time for Working Folks to keep more of their own money in light of Bidenflation that is robbing them of spending power.

'Sen. Ted Cruz, R-Texas, on Thursday introduced legislation that would exempt tips from the federal income tax.'

'The text of the "No Tax on Tips Act" was obtained exclusively by FOX Business, days after the Texas Republican announced his plans to file it this week on "Sunday Morning Futures." The bill is co-sponsored by fellow Republican Sens. Steve Daines of Montana, Rick Scott of Florida and Kevin Cramer of North Dakota.'

Common sense, pro worker legislation with workers in the grips of the horror of Biden's inflation, need a little more money for gas and groceries.

'Daines, in his own statement, said: "Joe Biden’s sky-high inflation has hit hardworking Americans especially hard. Providing a much-needed tax cut for working families will help offset Biden’s high prices'

A darn good idea. Please discuss.

 

Sounds like an excellent piece of legislation if this is all that there is to it. I haven't read the legislation myself yet so will reserve the right to change my mind for now. It'd also be nice if those that received tips were paid at least the full minimum wage rather than a reduced version of it that we have now.

 

A stupid idea. Why should restaurant workers be exempt from income taxation? What makes them so special that they don't have to pay tax, but others with similar income do?

Hey, I am not against restaurant workers. Making a living on tips must suck. I think the whole idea of having tips as their only income is stupid. As someone coming from Europe, I hate the tip system in the US. It really doesn't help the workers, it helps the owners by hiding part of the cost of eating out, making it appear to the customer to be more affordable than it actually is. It's the concept of profit by nickle and diming to death, something US companies LOVE to do (look at flying, for example). The tip system also helps the owners with labor costs. If something should be done for the workforce depending on tips, it should be to outlaw the tip system, to include tips in the price of the product, and to pay servers an actual wage. THAT, I could get behind, not this stupid stunt by Cruz.

 

Tips shouldn't be considered an income. They're a gift. Should gifts be taxed?

Also, it doesn't actually hide any costs. You can choose to not tip anyone. Its not mandatory by law. And the price of a burger is still the same regardless if you tip or not.

And yeah, it can help the owners with labor costs...so what?

Btw, if a server does not get any tips or does not make a certain amount in tips (equal to the minimum wage everyone else gets), the employer is required by law to make sure that they are paid the same minimum wage everyone else gets. Now, we could discuss whether or not the minimum wage should be raised or not to make an "actual wage". But in the end they do get paid "an actual wage" as what is considered an "actual wage" right now by law.

 

Wages should not be taxed. Any taxes involved should be paid by the person purchasing the time/work/labor. Lincoln had this correctly.
[A message to the U.S. Congress, 3 December 1861.
Reprinted from Land and Freedom, September-0ctober 1937]

"It is not needed, nor fitting here (message to Congress in re the civil war) that a general argument should be made in favor of popular institutions; but there is one point, with its connections, not so hackneyed as most others to which I ask a brief attention. It is the effect to place capital on an equal footing with, if not above, labor, in the structure of government. It is assumed that labor is available only in connection with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it induces him to labor. This assumed, it is next considered whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them, and drive them to it without their consent. Having proceeded thus far, it is naturally concluded that all laborers are either hired laborers or what we call slaves. And further, it is assumed that whoever is once a hired laborer is fixed in that condition for life.

Now, there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights."

 

When you die should there be no inheritance tax? It's the same thing.
Tipping is a horrible system. It took a team to make your meal as good as it was yet one person gets rewarded and you want the reward to be tax exempt while the rest of the team pays taxes on all their pay.

 

It is our impression that "gifts" can be and are taxed, depending on the amount and the situation.

 

Gifts already ARE taxed, you know this, didn't you? Of course, for gifts, the tax is paid by the donor, and there is a large exemption limit of $18,000 per year.

The problem with this, however, that a tip is not a gift. To be a gift, there would be an exchange of money with nothing in return. This is clearly not the case here, since the tip is in return for services that were provided by the waiter.

 

I always tip in cash. That way, the server can decide whether or not it was a non-taxable gift.

 

If Biden had proposed, this the progressives would be all for it.

Frankly I don’t agree that one source of wage income should be exempt from taxes. See, I can disagree with my party.

Tips are paid for good service. It is an incentive for wait people to improve your dining experience. If a waiter or waitress provides lousy service, they make less. That is only fair.

Raising wages will for restaurants to raise menu prices. If the European system were instituted here, it would result in more restaurant closing. The $20 per hour minimum wage is resulting in restaurant closings in California.

 

Because very few, if any, make enough money to pay taxes to begin with. Why waste time and money processing tax returns on people who don't even pay taxes?

 

Does this tax free status for tips only apply to wait staff, or does it include high tip recipients such as strippers?

 

because if you didn't the number of people who don't pay taxes would increase significantly.

 

Over half the country doesn't pay taxes. Some trades, like waiting tables, should be exempt because they don't make enough money to pay taxes to begin with.

 

What would be fair would be for the employer to pay a fair wage. If the reward for good service is a returning customer by all means give the wait a raise. A better system would be fair wages with the customer able to easily give positive or negative feedback on service and meal quality.
A long time ago I was the head chef in a high class establishment popular at lunch for business people. A group wanted a special dessert to celebrate the burning of their business mortgage. Naturally I made a flaming dessert which required that I serve it and they were suitably impressed. Afterwards I asked the wait what kind of tip they left, $20 on a $400 tab. It was a women owned business. Conversely I've known men that paid well over 25% for good service. Subsequently the waits were inclined to give better service to men than women unless the women had a history. You should be able to expect top service when you step in the door and just as the kitchen staff was rewarded for their efforts so too should the wait staff.
Get in the habit of giving the best service to all and you can demand a pay increase reflective of that.

 

While it is quite true that most servers do not make enough money to pay Federal income taxes, they are still liable for FICA taxes. Would Trump's proposal exempt that tax also?

There are already a significant number of people who don't pay Federal income taxes.

 

If you are going to get the money no matter how well or poorly you perform, the slackers will live off the work of the people who work hard.

 

Will never pass the Senate and it will cost in upwards $250 billion towards the budget. It will die in committee by the end of the term.

 

The slackers will be fired.

 

Clarificatoin. Initial gifts are not taxed per IRC 102 by the receiver. The giver is not "taxed" on any gifts at or below the gift exclusion per IRC 2503. That current annual gift exclusion per per per anum is $18000. It is adjusted annual in IRS notices by the end of the 3Q of the year. Anything beyond that amount goes to the unified credit for gift and estate tax purposes which a Form 709 must be filed by any US taxpayer. Different forms are used for nonresident aliens for tax purposes. Once the unified credit is used, then the gift tax is applied. That unified credit also reduces the estate tax exemption which the 706 may be required to be filed.

Tips are not gifts. On the Form W2, there are two entries for tips. Box 7 called Social Security tips, and box 8, allocated tips. Both are subject to SS and medicare taxes as well as income taxes.

Then there are rules for business establishments whose service relies on tips, such as restaurants and certain other entertainment businesses.

 

It will increase the deficit by $250 billion. sure you want that?

https://www.inc.com/melissa-angell/trumps-call-to-stop-taxing-tips-could-cost-up-to-250-billion.html

 

Its called a refund. The credits may include EITC, ACTC, and other refundable credits that the taxpayer may be eligible for. It won't solve that nor will the proposal exclude tips from being taxed on SS and medicare, ,which may require the person to file a tax return and pay the social security and medicare taxes on their half as an employee.

 

It strikes me as a complete misunderstanding of the actual problem in the area. For a limited set of workers in the US, tips are in practice treated as a standard and default element of their pay, to the point that there is a special minimum wage for those workers which is expected to be routinely made up to the standard minimum wage via tips (only to be met by the employer if the tips don't reach the standard minimum wage). That has never made sense and the fact it has been allow to continue for so long is ridiculous.

What you need to do is return the concept of tips to what they actually should be; a bonus for exceptional service. The standard wage for servers should be similar to equivalent workers, as should their tax responsibilities. Actual real tips, given by customers without pressure or manipulation by the restaurant, could indeed be tax exempt but trying to bring in that without addressing the underlying system in indefensible.

This isn't pro-worker at all. At best it is pro a specific subset of workers but does nothing to help loads of equally low-paid workers, some of whom will be working in exactly the same workplaces.

 

It's cost the taxpayers millions of dollars to process all that.

What sense does it make to spend millions of dollars to take money from people, just to give it right back to them?

 

Not as much as you might think considering some 137 million tax returns were processed electronically out of 144 million tax returns filed as of 5/7/2024. Electronic tax returns are processed without any labor help. That is why there are two processing centers for business returns and three processing centers for individual returns. Some returns have to be filed by mail such as an amended return or a tax return with a Form W7 attached, along with a few other exceptions. But the cost is based on those manual processing returns, not electronic filed processing returns, at least not directly.