Hurting the little guy: Obama makes it easier for waitresses' tips to get stiffed by patrons
1) When there is a large amount of money at stake patrons might be more likely to skip out on payment.From the WSJ:
2) When you have a large party there is a potential problem of free-riding. Suppose that you have a party of eight. Each patron hopes that if the other seven patrons pay a tip, they might hope that them not paying their tip wouldn't be noticed if everyone else paid theirs.
. . . Starting in January, the Internal Revenue Service will begin classifying those automatic gratuities as service charges—which it treats as regular wages, subject to payroll tax withholding—instead of tips, which restaurants leave up to the employees to report as income.
The change would mean more paperwork and added costs for the restaurants—and a potential financial hit for waiters and waitresses who live on their tips but don't always report them fully.
Darden Restaurants Inc., owner of Olive Garden, LongHorn Steakhouse and Red Lobster, has long included automatic 18% tips on the bill for parties of eight or more at its more than 2,100 restaurants, but is experimenting with eliminating them because of the IRS ruling, said a spokesman. . . .Good thing that Obama is going after those tax cheating wealthy waitresses and waiters!