"No Tax On Tips" is so stupidly regressive and yet another addition to the complex tax law. Somehow we decided a waiter making 100k with tips needs more help than a stock worker at Walmart.

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pessimizer 5 days ago | parent [-]

It isn't "no tax on tips" that's regressive, it's tips themselves. If tips are a gift, then they should be taxed as gifts are taxed. End tips and raise wages, and the taxes cease to be confusing or controversial.

For example, half of parents are transferring an average of $1,500/month, tax-free, to their adult children.* Why do they get to do this?

Or to take it to absurdity, why aren't my donations to charities taxed? What's the reason for the carveout? Should I instead donate earmarked cash to a charity that provides assistance to underpaid waitstaff?

[*] If you didn't hear that the other half are getting this, now you know: https://www.savings.com/insights/financial-support-for-adult...

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twoodfin 5 days ago | parent | next [-]

For example, half of parents are transferring an average of $1,500/month, tax-free, to their adult children. Why do they get to do this?

For the same reason we have a generous gift tax exemption applicable to any gift from anyone to anyone: If you’re not receiving something of monetary value in return, what you’re providing isn’t “income” in the sense Congress has built income tax policy to capture.

That isn’t the case with tips for waitstaff.

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kelnos 5 days ago | parent | prev | next [-]

Well, this year I suppose it will be $1,583.33. That's just the gift tax exclusion ($19k this year) at work. I don't really see a problem with it. People should be able to give money to family members without penalty.

> End tips and raise wages, and the taxes cease to be confusing or controversial.

Some businesses have tried this, but often it doesn't work out. To make this financially feasible, it would require action at the federal and state levels to 1) eliminate different tipped vs. regular tax rates (some places have done this already), 2) and modify how payroll taxes work to even things out a bit. It sounds like "oh, no problem we'll just raise prices by 20% to cover the extra salaries". But no, that doesn't work, because businesses and individuals are responsible for payroll tax on non-tipped salaries.

And there's a collective action problem at play: take two identical restaurants. One follows the now-standard model of accepting tips, and ~20% is customary. Their identical competitor won't accept tips, pays their staff better, and charges 20% more for their food. Fun outcome: people get sticker shock at the second place and go to the first place instead, even though in the end they pay exactly the same amount. Human psychology is dumb, and restaurants know this, so they won't do this unless all their competitors are also required to do it. (This is also why in the US prices are advertised tax-excluded; pricing that includes tax is viewed as more expensive, even if the final charge is the same.)

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happyopossum 5 days ago | parent | prev | next [-]

That survey is stupid in this context, as it include everyone 18+ as an ‘adult child’, which includes a lot of college students. There’s nothing malicious about supporting your kid in college, nor would it make any sense to tax that.

	▲	tempestn 5 days ago \| parent [-]
		Nothing wrong with giving money to your kids in general. That income has already been taxed. If they were paying the kids for pretend work and taking a deduction for the higher-income parents, that'd be different.

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5 days ago | parent | prev | next [-]

[deleted]

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naniwaduni 5 days ago | parent | prev [-]

> As you might expect, Generation Z adults (ages 18-28) receive more financial support from their parents than their Millennial counterparts (ages 29-44),

I mean, yeah, something like a third the former are college students! What a trash fire of an article.