I think the lost nuance is that the previous guy means that with tips, the public pays for tips directly.
You’re technically correct, the public, by buying food and service, is paying the company, creating a pool of money from which the costs of business are to be paid, ideally including staff in full. And currently, wait staff has to be paid by the customer directly.
(This mostly holds for most of the US, in many places, it does work according to the more ideal model)
You wanna know what’s even more lost nuanced? the fact that a customer paying your salary via tip is after they’ve paid taxes. So let’s say they tip $1 - in my country that means they had to earn $2 before tax (assuming the customer is a billy big bollocks higher-rate tax payer).
But what about if the employer pays the server instead? well now we’re talking…when the emplopyer pays the server, it does so PRE-TAX. That is to say they can pay the server $1 and in order to do so they only had to earn $1. While if they banked that $1 as profit, they would pay tax on the $1 first and so see less of it (let’s call it $0.80). Mind you, that does mean that the service worker now needs to pay $1 on that income…but surely they would declare their tips anyway and pay the tax either way? right? riiiiight?
Long and the short of it is - the cheapest way for the server to get $1 is for the employer to pay it to them and pass the cost on to the customer. The cost to the employer is what the company would have received post-tax for that $1 which as we said earlier was $0.80. The server got the $1, the employer is not gaining or losing anything, and the customer is only paying $0.80 which means they only had to earn $1.60 instead of $2. Everyone wins, except the tax man doesn’t win quite as much as he was winning before. Cry me a river.
I think the lost nuance is that the previous guy means that with tips, the public pays for tips directly.
You’re technically correct, the public, by buying food and service, is paying the company, creating a pool of money from which the costs of business are to be paid, ideally including staff in full. And currently, wait staff has to be paid by the customer directly.
(This mostly holds for most of the US, in many places, it does work according to the more ideal model)
You wanna know what’s even more lost nuanced? the fact that a customer paying your salary via tip is after they’ve paid taxes. So let’s say they tip $1 - in my country that means they had to earn $2 before tax (assuming the customer is a billy big bollocks higher-rate tax payer).
But what about if the employer pays the server instead? well now we’re talking…when the emplopyer pays the server, it does so PRE-TAX. That is to say they can pay the server $1 and in order to do so they only had to earn $1. While if they banked that $1 as profit, they would pay tax on the $1 first and so see less of it (let’s call it $0.80). Mind you, that does mean that the service worker now needs to pay $1 on that income…but surely they would declare their tips anyway and pay the tax either way? right? riiiiight?
Long and the short of it is - the cheapest way for the server to get $1 is for the employer to pay it to them and pass the cost on to the customer. The cost to the employer is what the company would have received post-tax for that $1 which as we said earlier was $0.80. The server got the $1, the employer is not gaining or losing anything, and the customer is only paying $0.80 which means they only had to earn $1.60 instead of $2. Everyone wins, except the tax man doesn’t win quite as much as he was winning before. Cry me a river.
Tax evasion ftw