Hurting the little guy: Obama makes it easier for waitresses' tips to get stiffed by patrons

Many restaurants automatically add tips to the tab for large parties.  There are obvious reasons for this.
1) When there is a large amount of money at stake patrons might be more likely to skip out on payment.
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.
From the WSJ:
. . . 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!



Blogger mikeishere1st said...

If it's on the bill then it is a part of the bill. That does make it a service charge and not a 'gratuity' - how I've always considered it. They could add an ambiance charge, window seating charge, cooking and dishwashing energy surcharge, a utensil fee and a table cleaning allowance. If any of those end up in an employee's pocket it's their INCOME.

The top 10% income earners in this country are providing nearly 70% of federal revenue. Almost half the country pays no income tax at all - some of them are restaurant workers too.

What, you don't think they should be paying their "fair share" John?

9/06/2013 7:58 PM  

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