> New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
I don't like the idea of even more expectations for tips, since we're already tip-fatigued. Despite that, I'd rather have less rules and taxes and have them actually enforced than have a situation where people pocket the cash portion of their tips untaxed anyway, which only punishes honest people.
RankingMember · 4h ago
It's pernicious. I've been to places that add "service charge" by default now to relieve tipping, then still give you the option to tip on top of that, which some people do because they think maybe the service charge isn't going to the server (in the places I've been to, it is). Tipping needs to die and it's frustrating to see it starting to proliferate in some European countries.
lotsofpulp · 4h ago
Just hit the zero tip option and move on with life. If a seller can’t advertise the price sufficient to sustain their business, that is their problem.
jollyllama · 5h ago
$1 subscription, but "This content is only available for my top 1,000,000 fans" ranked by tips.
nicce · 28m ago
I like the idea. How to implement in transparently in away you aren't always the 1,000,001 one?
aspenmayer · 5h ago
Oooh, I like this. Reminds me of charity auctions.
zappb · 4h ago
That must be where Onlyfans was inspired to emulate the business model.
hypeatei · 5h ago
"no tax on tips" was a pandering move to the mostly financially-illiterate populace that still don't understand progressive tax systems. Singling out certain types of income makes no sense and is very unfair. I wouldn't be surprised if this actually ends up resulting in less tip income over the long term due to people going "wait my income is taxed but theirs isn't, why should I tip as much?"
nickthegreek · 5h ago
Don't worry, no tax on tips actually phases out relatively quickly (2028) while the tax cuts enacted for the 1% are there to stay.
edit: fixed year typo
koolba · 4h ago
Extending the 2017 tax policies, specifically continuing the capping of SALT deductions, leads to higher taxes for high income earners. That deduction was worth $100K to a $1M/year income in a 10% State income tax state earner. Even more when you add in property taxes.
If they had not been extended the taxes for those high earners would have dropped for 2025 and beyond.
The bottom 50% pay no taxes and the top 1% still pay 40+% of federal taxes.
loeg · 2h ago
> That deduction was worth $100K to a $1M/year income in a 10% State income tax state earner.
What? Income deductions are only worth the marginal tax rate on that income -- ~40% on $100k of income deducted is worth ~$40k. (With the $10k SALT cap, he can still deduct $10k, worth about $4k.) The top bracket being reduced from 40% to 37%, and starting at a higher income threshold, likely saved the same high earner more than $36k.
triceratops · 4h ago
> The bottom 50% pay no taxes and the top 1% still pay 40+% of federal taxes.
This tells us nothing unless we know how their relative income shares. If the bottom 50% earns only 20% of all income (just an example) this is quite fair. If they earn 60%, it's unfair.
The number of people who just trot out this statistic without context is quite tiresome.
And of course everyone pays sales tax, property tax (even if they're a renter), payroll tax and so on.
True, though it's irksome how the chart conflates "Rich" with "High taxable income."
These are not the same, which is exactly the problem!
eg: The #1 most wealthy American is Larry Ellison, whose net worth increased $89B today with zero tax implications.
triceratops · 4h ago
That doesn't answer the question I posed. First off it conflates "high-earning" with "wealthy". Plenty of early career doctors are high earners but have a negative net worth. They pay more taxes than someone with millions in net worth but lower "income".
Secondly, just because the median earner pays a 2% average income tax rate while the top 1% pays on average 21% doesn't tell us anything about its fairness. It ignores income share.
ceejayoz · 4h ago
> the top 1% still pay 40+% of federal taxes
No. They pay 40% of Federal income tax, specifically.
> The Federal Insurance Contributions Act (FICA /ˈfaɪkə/) is a United States federal payroll (or employment) tax payable by both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.
7.65% of your check until you hit the cap. Employer pays a similar amount.
Spivak · 48m ago
And stores pay sales tax.
> By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages.
Who is charged the tax and who pays it are different things.
triceratops · 4h ago
2008?
immibis · 4h ago
> Singling out certain types of income makes no sense
Actually it makes sense based on what income can be reliably taxed. Impossible to verify how much that person actually tipped, so better write $0 on the tax form. As someone else wrote, that only punishes honest people.
hshdhdhj4444 · 5h ago
No tax on tips is the kind of policy you’d come up with if you were creating a caricature of the far left.
And yet, in today’s America that’s the major economic policy of the leader of the Republican Party.
mhb · 13m ago
> if you were creating a caricature of the far left
Yes. And a big round of applause to welcome Mr. Zohran Mamdani.
hypeatei · 5h ago
Well, it's a very populist move and the extremes of either party will go down that road to get votes. Far right parties are generally for social programs as long as the wrong people don't get them.
That may have been a strategic endorsement, to keep it from becoming a campaign issue.
dlcarrier · 4h ago
It has broad bipartisan support and was one of very few policy changes promised by the Harris Walz campaign.
Conservatives like it, because it is effectively a de minimus exemption on taxes, simplifying the tax collection process, and liberals like it because it results in more progressive taxes, with tip earners overrepresented amongst low-income earners.
standardUser · 45m ago
It does nothing to simplify the tax code, and it opens up a universe of loopholes. The concept may have some merit, but the implementation is sloppy and lazy.
EliRivers · 5h ago
Okay, so if I had some employees working jobs that are part of this, could I give them a tip? Could I give them 25000 dollars of tax free tip.
aynyc · 5h ago
I think the tip here is defined as customer directly to employees. I'm sure an enterprising tax attorney can come up with ways to help your idea.
lotsofpulp · 5h ago
An employer is an employee’s customer.
ta1243 · 4h ago
As a contractor my customer pays me $2k a day. Instead they could pay me $20 a day and $1800 a day in tips. Everyone wins.
aynyc · 4h ago
In 14 days, you hit the cap. In 75 days, you start to hit the phase out band.
busymom0 · 5h ago
I use "tipping" in my Hacker News app Hack. Basically users can tip an amount they pick. Would such "no tax on tips" apply to that too?
dlcarrier · 4h ago
If it's free for all users, and you don't provide any benefit to those "tipping", it's already an untaxed gift in the US, if no individual gifts more than $19,000, and even then, the gift giver would pay any taxes. Tips require a customer relationship to exist.
richwater · 5h ago
"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.
pessimizer · 4h ago
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?
No nonsense on dividing tips between people that I did not interact with, minimum tipping, or with automated machines.
Tipping also means that if I want to know how much I'll spend in your restaurant I will have to decide how much I tip even before I walk in.
This is all just tax evasion with extra steps, enabling exploiting of people that have less contractual power.
tastyfreeze · 1m ago
I used to try practicing no tips. I live in a state with no different tipping wage. To me that makes the argument of "they get paid nothing" impotent. But, culturally, people will perceive you as a prick for not tipping at restaurants. It's not fair and I don't like it but, that is the culture that has spread from tipping wage states.
Now that I have given up on that battle I do scale my tip for how good the service is.
codedokode · 53m ago
> Does the opposite movement exist?
Japan?
downrightmike · 4h ago
Sort of, but they chose to outsource instead of paying people/taxes
yunohn · 5h ago
Truly bizarre how this is playing out - was the digital creator carve out requested by the various right wing streamers that are part of Trumps’s core sycophant club? Doesn’t make any sense.
arctics · 5h ago
"No Tax on Tips" meant for low income taxpayers so most of the major digital creators won't qualify.
Low income digital creators can deduct upto 25k in tips, so if their income from tips and other sources is below $150k a year, their taxable income will be 25k less.
NooneAtAll3 · 5h ago
I have no measure of scale on 150k dollars a year in terms of creators scale...
I remember something like 2k$ youtube ad revenue for 1M views, so that's like 1M video every 4 days? or was it 2M views per 1k dollars, then it's 1M video every day?
ThrowawayTestr · 5h ago
$1 per 1000 views is a good estimate. Depends wildly on content.
inhumantsar · 4h ago
I've seen that same figure for YT ad revenue alone. sponsorships can range from $0.015-0.030 per video for channels with 1k to 50k subscribers.
at a biweekly cadence, they'd need ~6M views per video to hit $150k with ads alone. if you figure another $0.025 per view for sponsorships, then they would need 6M views per year or about 240K per video.
looking at Patreon stats, it seems reasonable to assume that a channel with 25K subscribers could pull in about 1K Patreon subs with effort. if each is paying $5/mo, then that would add another $60K/yr in revenue (though I imagine a lot of that would get eaten up by fees and extra costs.
cma · 5h ago
Median single income in the US was around $45,000 in 2024. $150K is not low income. It goes to $300K if filing jointly.
Major creators may still not get much since it's a power law distribution, but the tips thing is in no way limited to low income.
arctics · 5h ago
Generally correct, low income digital creators will benefit the most since "No Tax on Tips" will reduce their taxable income by 50% or more in comparison to someone who earns close to 150k which isn't a low income according to BLS as you pointed out.
cma · 12m ago
If you look at tax brackets plus the standard deduction lowering the bracket it affects, it will be a flat or regressive change in take home income amongst the cohort until at $90K or maybe a bit more, double median income, where you can start writing off against the 22% bracket. Assuming 50% tips.
exabrial · 5h ago
Love this. Step in the correct direction. Property Taxes are coming under fire next, and given their long racist history, it's about time.
crazygringo · 5h ago
Is it?
Why should tip income not be taxed but other income should be? How is that fair? What principle makes that just?
Are bartenders and servers more deserving of avoiding taxes than cooks and janitors, for some reason?
ndriscoll · 5h ago
Not that I'm a fan of tipping culture or the "creator" economy, but it seems like tips and donations to your favorite youtuber are obviously gifts to me? From irs.gov:
> You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return.
Which is obviously true for tips and donations. If it is a gift, then the giver owes taxes, and there is a $19k/year/recipient exclusion, so small gifts like this would always be exempt.
bdcravens · 5h ago
It's not about benefitting the employees, but the employers. It's meant to push back against livable wages.
alchemical_piss · 4h ago
The employers already had all kinds of bizarre tricks to keep tipped workers down.
My girlfriend works for a local chain restaurant. Some of the things she tells me about seem like they shouldn’t be legal (forcing everyone’s cash tips to be pooled with non tipped teenagers they don’t want to pay, for example. Pretty sure the company has had previous class actions against them. This was just a small local chain in a middle/upper middle class suburb.
I saw a post on Nextdoor the other day where another restaurant closed, laying off the workers without paying them for hours worked. The general consensus about how to get the money you worked for: you don’t. The state has no labor board and there was little option for recourse.
exabrial · 3h ago
Progress, not perfection.
apercu · 5h ago
Agreed. Why aren’t capital gains taxed at a higher rate than income?
(Please don’t give me bullshit answers based on hundred year old economic theories just because you’re a wanna be libertarian)
ta1243 · 4h ago
Because rich people earn more from capital gains than income?
xnx · 5h ago
What is you idea for how to collect revenue for government services? Import taxes?
exabrial · 3h ago
Ideally: nothing.
velcrovan · 2h ago
Places like that exist. You should try living there, see how you like the quality of life.
exabrial · 54m ago
I can't because people wont leave me alone.
eddythompson80 · 41m ago
What do you mean? Who is stopping you from moving to Dubai?
bdcravens · 5h ago
I suspect much of the attacks against property taxes aren't to right any historical wrongs, but is part of the attack against public education, since property taxes are a major source of funding.
briandear · 26s ago
No. It’s the idea that you’re renting your paid off home from the government. And the government gets to decide what it’s worth.
> New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
* https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-...
There's also a maximum of $25k/year (~$2k/mo).
edit: fixed year typo
If they had not been extended the taxes for those high earners would have dropped for 2025 and beyond.
The bottom 50% pay no taxes and the top 1% still pay 40+% of federal taxes.
What? Income deductions are only worth the marginal tax rate on that income -- ~40% on $100k of income deducted is worth ~$40k. (With the $10k SALT cap, he can still deduct $10k, worth about $4k.) The top bracket being reduced from 40% to 37%, and starting at a higher income threshold, likely saved the same high earner more than $36k.
This tells us nothing unless we know how their relative income shares. If the bottom 50% earns only 20% of all income (just an example) this is quite fair. If they earn 60%, it's unfair.
The number of people who just trot out this statistic without context is quite tiresome.
And of course everyone pays sales tax, property tax (even if they're a renter), payroll tax and so on.
These are not the same, which is exactly the problem!
eg: The #1 most wealthy American is Larry Ellison, whose net worth increased $89B today with zero tax implications.
Secondly, just because the median earner pays a 2% average income tax rate while the top 1% pays on average 21% doesn't tell us anything about its fairness. It ignores income share.
No. They pay 40% of Federal income tax, specifically.
https://nymag.com/intelligencer/article/fact-check-richest-1...
> The bottom 50% pay no taxes
Same mistake here. They pay plenty of payroll etc. tax.
The top 1% pays 24% of Federal taxes, and the bottom 50% pays somewhere between 7% (bottom 40%) and 16% (bottom 60%).
Also I'm unclear if that source includes only the "employee half" of the 15% FICA.
https://en.wikipedia.org/wiki/Federal_Insurance_Contribution...
> The Federal Insurance Contributions Act (FICA /ˈfaɪkə/) is a United States federal payroll (or employment) tax payable by both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.
7.65% of your check until you hit the cap. Employer pays a similar amount.
> By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages.
Who is charged the tax and who pays it are different things.
Actually it makes sense based on what income can be reliably taxed. Impossible to verify how much that person actually tipped, so better write $0 on the tax form. As someone else wrote, that only punishes honest people.
And yet, in today’s America that’s the major economic policy of the leader of the Republican Party.
Yes. And a big round of applause to welcome Mr. Zohran Mamdani.
You have too much partisanship on your mind.
Harris (Democratic party leader) endorsed it: https://www.cnn.com/2024/08/12/politics/taxes-on-tips-elimin...
Conservatives like it, because it is effectively a de minimus exemption on taxes, simplifying the tax collection process, and liberals like it because it results in more progressive taxes, with tip earners overrepresented amongst low-income earners.
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...
No comments yet
Like "No Tips".
Pay your employees, pay your taxes.
No nonsense on dividing tips between people that I did not interact with, minimum tipping, or with automated machines.
Tipping also means that if I want to know how much I'll spend in your restaurant I will have to decide how much I tip even before I walk in.
This is all just tax evasion with extra steps, enabling exploiting of people that have less contractual power.
Now that I have given up on that battle I do scale my tip for how good the service is.
Japan?
Low income digital creators can deduct upto 25k in tips, so if their income from tips and other sources is below $150k a year, their taxable income will be 25k less.
I remember something like 2k$ youtube ad revenue for 1M views, so that's like 1M video every 4 days? or was it 2M views per 1k dollars, then it's 1M video every day?
at a biweekly cadence, they'd need ~6M views per video to hit $150k with ads alone. if you figure another $0.025 per view for sponsorships, then they would need 6M views per year or about 240K per video.
looking at Patreon stats, it seems reasonable to assume that a channel with 25K subscribers could pull in about 1K Patreon subs with effort. if each is paying $5/mo, then that would add another $60K/yr in revenue (though I imagine a lot of that would get eaten up by fees and extra costs.
Major creators may still not get much since it's a power law distribution, but the tips thing is in no way limited to low income.
Why should tip income not be taxed but other income should be? How is that fair? What principle makes that just?
Are bartenders and servers more deserving of avoiding taxes than cooks and janitors, for some reason?
> You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return.
Which is obviously true for tips and donations. If it is a gift, then the giver owes taxes, and there is a $19k/year/recipient exclusion, so small gifts like this would always be exempt.
My girlfriend works for a local chain restaurant. Some of the things she tells me about seem like they shouldn’t be legal (forcing everyone’s cash tips to be pooled with non tipped teenagers they don’t want to pay, for example. Pretty sure the company has had previous class actions against them. This was just a small local chain in a middle/upper middle class suburb.
I saw a post on Nextdoor the other day where another restaurant closed, laying off the workers without paying them for hours worked. The general consensus about how to get the money you worked for: you don’t. The state has no labor board and there was little option for recourse.
(Please don’t give me bullshit answers based on hundred year old economic theories just because you’re a wanna be libertarian)