Minimum Wage Tip Credit Clouds US Estate Tax Vote August 2, 2006
Posted by notapundit in Congress, Economic News, Main, Politics, US News.trackback
WASHINGTON (Dow Jones)–Fine print in a proposed bill to increase the federal minimum wage would gut wage laws in seven states and decrease pay for waiters and other workers who rely on tips, Sen. Barbara Boxer, D-Calif., said Wednesday.
“Any of these people in these tip states, they’re in deep trouble,” Boxer told reporters. “If you look back at most of the Republican versions of minimum wage increases, they always have some kind of poison pill.”
The minimum wage “tip credit” revision is in a pending tax-cut bill that would boost the minimum wage from $5.15 to $7.25 per hour over three years. The “Estate Tax and Extension of Tax Relief Act of 2006,” a $309.8 billion tax-cut bill, also would reduce estate taxes and renew a package of expiring tax provisions, such as the corporate research tax credit.
Rep. Jim McCrery, R-La., has said the issue isn’t as complicated as Democrats think. “If a state wishes to continue to have a higher minimum wage, all they have to do in response to passage of this bill is to pass any kind of tip credit,” McCrery said last week.
The controversy is significant since the minimum wage provision was designed to attract several swing Democrats in the Senate to achieve the Republican priority of cutting estate taxes. The outcome of the vote, expected Friday, is unknown amid intense lobbying.
“It’s going to make it or miss it by one or two votes,” said Robert Greenstein, executive director of the Center on Budget and Policy Priorities. “We may not know until the roll is called on Friday.”
Sen. Trent Lott, R-Miss., agreed, predicting the vote hung on a handful of senators.
Boxer said the minimum wage provision would harm tip workers in Washington state, where the state minimum wage is $7.63. One potential swing vote is from Washington, Sen. Maria Cantwell, D-Wash. A Cantwell spokesman didn’t immediately return a call seeking comment.
The dispute involves a provision of federal law, known as the tip credit, that allows employers to take credit for an employee’s tips when calculating whether that employee has been paid the federal minimum wage. For example, an employee expected to earn $2 per hour in tips could be paid $3.15 per hour, instead of the $5.15 per hour minimum wage for employees who don’t receive tips.
Under federal law, the most a tip-earning employee’s hourly wage can be reduced is $2.13 per hour.
Currently, seven states don’t allow employers to claim a tip credit when calculating the minimum wage for employees: Alaska, California, Montana, Minnesota, Nevada, Oregon and Washington.
The bill says that once it’s signed into law, states or cities may not enforce local minimum wage laws that exclude employee’s tips from being considered as wages. The state or city can revise their laws to allow this, but there’s disagreement about how such a provision would work.
“It is a preemption of a state like mine,” Boxer said. “This is clear language, this is intentional.”
McCrery said the solution to the issue is straightforward. States can act to amend their laws and “can fully restore the minimum wage that that state wishes its employees to have,” McCrery said.
The House Ways and Means Committee, the Joint Committee on Taxation and the National Restaurant Association had a slightly different view. They say the provision would allow employers to use tip credits against meeting any future increases in state minimum wages.
For example, if a state increased its minimum wage $1 per hour, employers would be allowed to claim a $1 per hour tip credit, according to the National Restaurant Association.
Boxer insisted this results in a dramatic pay cut for waiters and tipped employees in seven states with such protections. California has a $6.75 minimum wage and San Francisco has an $8.82 minimum wage. If the bill passes, Boxer contends it will impose a $2.13 minimum wage for tipped employees, resulting in a $9,610 decrease in annual pay for a tip-earning employee in that state.
Sen. Norm Coleman, R-Minn., has supported a repeal of the estate tax in the past, but expressed concern about the minimum wage tip credit attached to the repeal this time around.
“Clearly we have to work on a clarification of the language,” Coleman said.
Another Republican estate tax supporter, Sen. Lisa Murkowski, R-Alaska, agreed the tip credit was an issue and said “we’re trying to work it out.”
“We’ve got six different opinions and they’re all in conflict,” Murkowski said.
By Rob Wells and John Godfrey, Dow Jones Newswires
Not only would imposing a $2.13 minimum wage for tipped employees, result in a $9,610 decrease in annual pay for a tip-earning employee in that state, it would increase the profits of the businesses who were allowed an ability to utilize their tipped worker’s tip income to pay their minimum wage responsabilities.
You see, what this bill seeks, is to allow businesses an ability to steal the finacial benfit of their worker’s tips like so many states other have already allowed. All but seven states have criminally allowed business owners an ability to benefit themselves to the tips consumer’s present their workers.
Imagine working in a restaurant where you receive $40 in tips every day. Now imagine your employer being allowed to reduce your hourly wages by $40 a day because you received tips. That is exactly what Masssachusetts and many other states are allowing. Now, they want other states to allow employers to do the same thing to their employees. This bill is about letting businesses steal from their workers.
When employers are allowed to reduce the tipped workers wages because he has receive tip income, employers are actually allowed to take their employee’s tips through paycheck deductions. While the employee’s tips are not directly being taken, the worker’s tips are indirectly being taken. It should not matter whether employers are taking their employee’s tips directly or whether employers are taking their worker’s tips indirectly, for in both cases the employee’s tip are undeniably being taken and a crime is being committed.
Our government’s attempts to give relief to small business owners is commendable to the extent that they do not violate the law. The tips credit, which was introduced in an effort to provide relief to small business owners has allowed business owners an ability to take their worker’s tips. While I applaud their efforts to help small businesses, I am appalled by the fact that our federal government is allowing businesses an ability to indirectly steal their workers tips. Consumers are not tipping so that business owners can pay their workers less in wages, save money, and financially benefit themselves to the consumer’s tip. The tip credit is fraud on the consumer and an injustice to those workers who receive tips. While consumer’s are attempting to bestow additional income on employees of their choosing, our government has passed a law giving over the financial benefit of the consumer’s tip to business owners.
The tip credit must be repealed on the grounds that it is not only fraud on the consumer, but an injustice to the workers. The tips consumers present to certain workers in the service industry are being turned into financial benefits for business owners. Please note that employers are and will continue to solicit tips from the public now that our government has allowed businesses an ability to take the consumer’s tip for themselves. Look at all the tip jars that have popped up over the last several decades. The reason business are putting out tip jars to solicit tips from the public is because our government has passed a law which, despite it’s good intentions, does nothing more than allow business owners an ability to fraudulently benefit themselves to the consumer’s tip.
Why are employer being allowed to pay their workers who receive tip income $2.13 an hour instead on $5.15 an hour? Consumers who tip workers are obviously attempting to increase these worker’s earning and yet our federal government seems to think that these worker’s earnings should be lowered. When our federal government lowers minimum wage for tipped workers, it negates the benefits consumer’s have attempted to bestow on these workers. If the workers are not benefiting from the consumer’s tip, someone else must be benefiting.
You see, our federal government has passed a law which allows employers an ability to benefit themselves to the consumer’s tip. Obviously if consumers are tipping at the same time employers are being allowed to reduce their workers hourly wages, the tips which are being presented will not benefit the worker. The reduced hourly wages will negate any kind of benefit to the employee and the benefit of the consumer’s tip will instead go to the employer who is now saving money because consumer’s have tipped his workers.
The federal tip credit is a law which fraudulently steals the benefits of the consumer’s tip so that employers may benefit themselves to the moneys presented. Proof of my assertion can be witnessed across our country as businesses blatantly solicit tips with tip jars where for decades tips were never solicited. Businesses now know that they may financially benefit themselves to the consumer’s tip without any consent on the part of the consumer. Businesses have succeeded in lobbying are federal government for an ability to steal their worker’s tips. Is this the model of government we perceive for the future?
Businesses should not be allowed to force consumers to pay the business’s minimum wage obligations. The tip credit allows businesses an ability to pass on the responsibility of paying minimum wage to those consumers who are willing to tip. If you tip a worker, his employer will be allowed to utilize part of your tip to pay the employer’s minimum wage obligations. The question which has remained unanswered, however, is, why are businesses being allowed to use the consumer’s tip to pay the business’s minimum wage obligations without the consent of the consumer. You see, the tip credit gives employers a legal ability to utilize the customer’s tip to save the business money void of any consent on the part of the consumer.
Many will argue that what I am saying is untrue, the tip credit simply allows businesses to pay tipped workers a lower wage. The truth, however, is that the tip credit was passed for one purpose and one purpose along. Business want to be able to utilize the consumer’s tips to save the business money and increase their own profits. You see, employers cannot utilize the tip credit and pay a worker $2.12 an hour unless you the consumer tip the worker. An employers ability to pay workers $2.12 an hour is based solely on whether or not you decide to tip his worker. If you tip a worker $24.00, his employer has been allowed by federal laws to reduce the worker’s hourly wages by up to $24.00 for that days work. However, if the workers also receives additional tips from other consumers the percentage taken from the tip credit wouldn’t be 100% like it would if you were the only one tipping that employee.
The point, however, is, your tip can be completely negated by the tip credit. While you may be attempting to benefit a worker to a $24.00 tip, his employer has been allowed to utilize your tip to pay the business’s minimum wage obligations. Instead of your tip financially benefiting the worker, your tip will instead financially benefit the business owner.
Example
You tip an employee $20.00
Because of the tip credit, this employee’s employer has been allowed to pay the employee $20.00 less for his day’s work. Instead of paying the worker $5.15 an hour times 8 hours, for a total of $41.20 for his day’s work, his employer has been allowed to apply your tip of $20 towards the $41.20 required by law and can now pay the employee $21.20 for his day’s work. The employee will be paid $21.20 for his days work instead of $41.20. The employee who was given a tip will now go home with the same amount he would have had you not tipped him. You see, if you would not have tipped him, his employer, by law, would have to pay him $41.20. Since you tipped him $20.00, he will now go home with your $20.00 tip but instead of taking home his normal hourly pay of $41.20 for 8 hours work, his hourly pay will only consist of $21.20 for that 8 hours of work.
You see, when employers are allowed a tip credit, they are actually allowed to steal what consumers have given their employee. Instead of employees benefiting from your tip, the tip credit allows business owners to benefit themselves to your tip. In the above scenario the worker does not benefit at all from the tip you gave him. While he will go home with the same income he would have had you not tipped him, his employer will see $20.00 reduction in staffing costs and will go home with $20.00 more in profits because you tipped his worker.
The tip credit is nothing more than fraud. Our federal government has passed a law that openly allows businesses an ability to defraud the consumer. While consumers are tipping to increase the earnings of workers in the service industry, our federal government has passed a law fraudulently allowing businesses an ability to benefit themselves to the consumer’s tip without his knowledge and without his consent.
Look, is there something wrong with employers being forced to pay a minimum standard wage to their workers? Is $5.15 an hour really to much to ask of business onwers? So what if consumers are tipping workers. Is there anyhting wrong with letting those workers who receive tips earn more than simply $5.15 an hour. You see, consumers are tipping workers so they won’t have to live on $5.15 an hour. In the meantime, however, our federal government has taken steps to negate the will of the public. While consumers are tipping to increase many workers earnings to a level above $5.15 an hour, our federal governemnt is passing laws to decrease these same worker’s earnings. Why the conflict of interest? I’ll tell you why our government has such a confict of interest on this issue. Business owners are paying them off to allow businesses an ability to steal this additional income consumers are attempting to bestow on workers. It’s not simply a conflict of interest, it’s business
Where is this petition to sign. I have been working in this business AS A SERVER since 1980 and our minimum wage (server wage) in 1980 was $2.01/hr with tip credit. It’s 2008 and it’s $3.38 now. It still is ripping us off to-this-day. This past summer I WOUND UP PAYING MY EMPLOYER $2,505.39 in tip credit just to work in THEIR restaurant in our Top Nat’l Park. Yeah it hurts, it shows up in the Deductions column on my pay check. Everyone’s hand is in our pockets these days, including MY EMPLOYER! Here’s how it breaks down:$2,505.39 was deducted from my tips taken-in, not to mention I paid-out approx. 6,100.00 in manditory tip shares to co-workers as well, now add to that taxes both state and federal, social security and medicare. Healthcare, what healthcare? ANY Seasonal restaurants as in the National Parks are TOTALLY EXEMPT from having to provide healthcare or 401k’s yet they CHARGE ME TO WORK IN THEIR RESTAURANTS. IT’S TRUE! 100% TRUE. People think we make a lot. NOT TRUE! Per person average is $18.and this is a very busy restaurant, 480 guests/night–8 servers–4 bussers–1 bartender.
Try this on for size:
Season: may 15 to Oct 15
Gross wages & tips received: $25,744.42
tips paid-out to co-workers -6,100.00
tip credit paid to employer -2,505.39
———–
17,139.03
Tax(state,fed,s.s.medicare) -4,207.68
_____________
MY NET TAKE HOME PAY 12,931.35 = MY TAX BRACKET
A TOTAL OF 50.22%
OF MY GROSS EARNINGS!
THIS IS TRUTH, THIS IS MY SUMMER 2007 FIGURES.
What’s even worse is most servers make a little more than
this in a year. That’s it!
WHERE DOES IT END? PLEASE, PLEASE HELP US ?????
Imagine working in a restaurant where you receive $40 in tips every day. Now imagine your employer being allowed to reduce your hourly wages by $40 a day because you received tips.
When employers are allowed to reduce the tipped workers wages because he has receives tip income, employers are actually allowed to take their employee’s tips through paycheck deductions. While the employee’s tips are not directly being taken, the worker’s tips are indirectly being taken. It should not matter whether employers are taking their employee’s tips directly or whether employers are taking their worker’s tips indirectly, for in both cases the employee’s tip are undeniably being taken and I believe a crime is being committed.
EXAMPLE:
You tip an employee $20.00
Because of the tip credit, this employee’s employer has been allowed to pay the employee $20.00 less for his day’s work. Instead of paying the worker $5.15 an hour times 8 hours, for a total of $41.20 for his day’s work, his employer has been allowed to apply your tip of $20 towards the $41.20 required by law and can now pay the employee $21.20 for his day’s work. The employee will be paid $21.20 for his days work instead of $41.20.
The employee who was given a tip will now go home with the same amount he would have had you not tipped him. You see, if you would not have tipped him, his employer, by law, would have to pay him $41.20. Since you tipped him $20.00, he will now go home with your $20.00 tip but instead of taking home his normal hourly pay of $41.20 for 8 hours work, his hourly pay will only consist of $21.20 for that 8 hours of work.
Who is benefitting from your tips? The employee or the employer? While the employee will go home with no more in his pocket had you not tipped him, his employer will see a decrease in payroll expenditures and go home with $20 additional money in his pocket.
The question that remains is,
Who is benefitting from your tip when an employer is allowed to decrease his employee’s hourly wages because of your tip?
The answer is, Employers are benefitting themselves to your tips. While some may use the money to pay other workers higher wages, the bottom line is, there is nothing preventing employers from taking the money for themselves.
Should employees really be subjected to an allowance that makes it possible for their employer to steal their tip?
The tip credit should be repealed on the grounds that it blatantly allows employers an ability to steal the financial benefit of the customer’s tip.