The proposal gives priority to tipped workers and leaves out the vast majority of Americans who are not in tipped occupations. Some tipped workers have incomes so low that they do not owe federal income tax. If customers perceive workers take home a greater share of their tips, they could tip less. The focus on taxes on tips could also distract from raising the
tipped and
untipped minimum wages and reduce pressure on employers to raise wages. The proposal could lead more industries to rely
more on tipping which is widely unpopular. The proposal could also enable
tax avoidance as income is represented as tips such as bonuses or commissions earned by hedge fund managers. If the proposal only covered federal income tax, it would not affect many low-wage workers that pay more in payroll tax than in income tax. By contrast, if the proposal included
payroll taxes, workers could lose access to Social Security and Medicare benefits. Tips could also be excluded from wages, resulting in workers receiving reduced
unemployment benefits. Reduced taxes would also lead to a loss of tax revenue. == See also ==