Did I hear right? Trump wants to drop income taxes on tips?

Great idea!

I tend to think of a tip as a reward or incentive for being treated well. And unless I'm having a deductible business meal the $$ I'm paying as a tip is being paid with money I already pay income taxes on, so if I leave a $2 tip, both me and the person that I'm tipping are being taxed on that $2, and one of us being taxed for that $2 should be enough.

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specman · 51-55, MVIP

Good post! This makes for a good debate!
However, I don’t see why tips( someone’s income) should be treated differently than any other Income someone earns.

Heartlander · 80-89, M

@specman The same reason why our kids don't have to pay income taxes on their allowance. Mom and Dad already paid income taxes on the money they earned and gave to their children as allowances. To make a 2nd or 3rd party pay taxes on what they receive usually means that the party paying them gets to deduct the payments as expenses. In the case of tips, we don't get deduct the tip when we file and pay our income taxes. Repeatedly taxing money passed down to another party without being deductible by the paying party is an economic killer.

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Heartlander · 80-89, M

@specman

Even if a parent is supporting an adult child at 20K+ a year, the kid doesn't pay taxes on that 20K+. The parent pays taxes when they earn the money to pay the kid, and the parent's employer doesn't pay taxes on what's paid to employees. If we think of the waiter/waitress as a service provider to someone who tips, then the person who pays the tip should be able to deduct the tip from his/her taxes as an expense. Like leave a $2 tip along with a copy of a 1099. All that is impractical, so just let tips pass free of a tax obligation.

specman · 51-55, MVIP

@Heartlander if that kid reports that as income to the irs they have to pay taxes on it

Heartlander · 80-89, M

@specman Well, I imagine that many, or at least some in the service industry didn't report cash tips to the IRS :)

specman · 51-55, MVIP

@Heartlander that’s the secret to not paying taxes on it. All ways try to get paid in cash on side jobs.

JollyRoger · 70-79, M

[@specman Well.... to differentiate: A tip (unless added to your bill automatically) is a gift. Now consider the things you look at when tipping: 1/ Is the person serving you already a millionaire?; 2/ Are they covered in expensive tattoos that show wanton spending?; 3/ Do they have a day career and are simply moonlighting? Or perhaps this is their third job today and they're trying to put a loaf of bread on the table for one or 2 children?

specman · 51-55, MVIP

@JollyRoger unfortunately laws have to be abided no matter what their situation is.

JollyRoger · 70-79, M

@specman Of course.... the reason for this post is to discuss whether the law is fair or might be looked at for changes.