Entrepreneurs could hardly believe their ears. In the space of a few days both presidential candidates endorsed a policy that would solve one of their biggest problems and cost them nothing.
When former President Donald Trump and Vice President Kamala Harris proposed eliminating taxes on tips, they saw an easy way to give their employees a well-deserved raise. Fortune spoke to several business owners whose staff earn part of their wages from tips, all of whom welcomed the initiative because it would benefit their employees.
“I may be a unicorn here, but this is about my employees making as much money as possible and improving their livelihoods and the situation of their families,” said Carl Sobocinski, founder and president of Table 301 Restaurant Group, which owns five restaurants in Greenville , S.C
Chris Stephens, who handles PR for his wife Maria’s Boston-based tour guide company, Boston Hidden Gems, said they were excited about what it could mean for their tour guides, who he said make between 20% and 30% of their compensation earn in tips. . “We would love it for our employees because it would mean more money in their pockets,” he said.
At Sobocinski’s restaurants, most of the waiters’ income comes from tips. Sobocinski and his CFO Richard Vogt crunched the numbers and estimated that servers could save an average of 16% to 19% in taxes if the policy were to become law. At his restaurants, the average waiter who makes about $48,000 a year, including $41,000 in tips, would save $6,600 in taxes, he said. Fortune. Meanwhile, the highest-paid servers, who earn $81,000 a year, with $69,000 in tips, would take home another $13,000 a year, according to Vogt’s calculations.
While the policy proposal was intended to benefit workers, it would also benefit the companies themselves, said Keith Hall, a labor economist at George Mason University’s Mercatus Center. “Anything that affects employee taxation is shared by both the employee and the employer,” Hall said
Entrepreneurs could make an offer higher real wages without incurring additional costs – a proposition that is especially attractive in the restaurant industry, where margins are razor-thin.
“For me as a business owner, it’s a win-win,” says David Viana, co-owner and chef of Heirloom Kitchen, a restaurant in Old Bridge, NJ.
As a result, business owners could be incentivized to put more of their employees’ wages into tips, Hall said. Both because it is what the employees would want; and because this would reduce their own wage bill and the payroll tax that companies have to pay.
Viana, Sobocinski and Stephens all said they had no plans to change the way they rewarded their employees, but they did acknowledge that tips would become much more attractive. Still, they emphasized the importance of increasing take-home pay for their employees amid rising costs of living.
Restaurants “are the last bastion where people in this country have a chance at a middle income,” Viana said. “In my opinion, the job for a living wage is going a bit the way of the dodo.”
Eliminating the tax on tips would help make an industry known as greul more attractive, Viana said. “It’s another way for an industry that has had a bad reputation in many ways – in the way we’ve treated our workforce and not being able to provide healthcare and the like – to put more money into the pockets of individuals. ”
Stephens, the tour guide, saw one scenario in which the policy could backfire: People saw it as an excuse to tip less. “The point of tipping, from the customer’s perspective, is generally to support the specific person or group you are tipping; If you as a customer can spend less but still support the same amount, why wouldn’t you?,” he said.
