Please Stop Virtue-Signaling and Just Pay Your Employees.

The No Tax on Tips Act, saying things with your chest, and perverse incentives.

Say It, and Price It, With Your Chest

Recently, while out to dinner in Portland, I got the bill at the end of my meal and in tiny little print above the tip line was a charge for “employee healthcare.”

I tried not to look shocked as I asked my friends what they thought. They noted it was nice to see servers getting healthcare. I didn’t disagree, but that wasn’t why I was upset.

I was upset that they separated it as a line item for the customer to pay and that these costs weren’t accounted for in the price of the food I’d just bought.

When did we start modeling restaurants after Airbnb and TicketMaster? Is this the beginning of the end? How far down the slope have we slipped?

Instead of including the price of employee healthcare into the costs of their business as reflected in their pricing, they put the responsibility directly on the consumer to pay for. They know people might complain about the price of the food otherwise, so they had to justify it to the customer, because if you argue against their employees having healthcare then you’re just an as*hole.

I roll my eyes at this kind of virtue-signaling.

“Hey, look what we’re doing! We take care of our employees!” Yes, and? I don’t need the entire businesses operations on my bill. Do I look like Accounts Payable to you? I just want pizza.

I believe that whatever you say, you should be able to say it with your chest. Chances are, if you’re whispering then maybe you shouldn’t be saying it.

Likewise, if you think your service, product, food, or whatever, is worth (or costs you) a certain price, then you should… charge that amount, not sneak in costs as a line item at the end of the bill. I probably sound like a grumpy consumer (because I am), but I’m concerned where this is headed.

Adding business expenses to the bottom of a restaurant bill is a little shady, virtue-signally and… all too familiar.

No Tax on Tips Act & the Reality of Tipping

Speaking of expenses at the bottom of a bill - the US Senate passed the No Tax on Tips Act on Tuesday, May 19th, making tips up to $25,000 exempt from being taxed. Unfortunately, the Act will be a bandaid on a system with a broken leg.

Let me give a brief history on the practice of tipping in the US, pulled from this article that offers a more in depth run down.

Tipping picked up in popularity once slaves were freed after the Civil War. When service-based industries began hiring newly emancipated Black men and women, they would offer them little to no wage and leave it up to customers to tip them as their gratuity for the service. The employers didn’t want the burden of paying their literal employees, so it was put onto customers. This cultural shift and systemic racism changed the tip from being a bonus for a job well done into the wage itself. Employers loved this cost-saving concept so much, it then became the industry norm and federally legalized.

Did you know there is a different minimum wages for tip-based industries vs non?

Currently, in the old year of 2025, the federal minimum wage is $7.25 ($14-16/hr in Oregon). Now, get this - the federal minimum wage for “tipped employees” is $2.13/hr.

$2.13. Per. Hour. !!! In the U.S. of A!

Don’t worry - if the employee hasn’t earned in tips what they would’ve made from regular minimum wage then the employer must pay them the difference.

Not every state differentiates wages. Oregon doesn’t, but other states do, such as Illinois.

When I was a server, which I did through most of high school and college, I worked hard and made decent money at times. I would never consider being a server in a state like Illinois though. I would simply pick a different minimum wage job that required less demands, humiliation, and gruesome hours.

As a server, your income is up to the fate of other people’s subjective morals and moods every day. Don’t get me started on the power trip this sends certain customers on. Ask any service-worker and they’ll tell you the atrocities they’ve endured.

Alright, since you asked. In college, I was a server at the first Cracker Barrel opened in Oregon (fun fact, I thought it was called Crackle Barrel when I went in for the interview). Want to know the day I made the least amount of tips?

Thanksgiving.

I guess the customers weren’t very thankful for their food (the location has since closed). I definitely did not walk away from that shift feeling thankful either. I bet Crackle Barrel did though.

You know what would’ve been better? Consistent pay. Or customers with more generosity in their hearts. Neither of which the No Tax on Tips Act will achieve.

False Incentives

A false or perverse incentive is an incentive or policy with a positive intended outcome but when followed could lead to worse or undesired outcomes.

Well, the No Tax on Tips Act is just one big fat perverse incentive, encouraging employers to continue pushing the responsibilities of their employees’ income onto customers. What’s packaged as this americana, for-the-people type of bill is actually a short-term solution that looks good politically but has negative long-term outputs.

Here’s my prediction:

The push for tipping culture will become even more aggressive, with employers and employees alike leaning heavily on the generosity of customers to subsidize their business. I’m not looking forward to tipping someone 40% on top of the bill (which was pre-selected on a tablet for me the other day!), plus 5% for their healthcare, and probably 3% for their pet’s healthcare, and now I’ve paid $35 for a burger. No fries.

While the Act specifies the tax cuts will be for services commonly accepted in the tipping industry as of 2023 data, who’s to say it will go as expected? I can easily see businesses turning to a “reduced-price” service model while leaning heavily into the tip-exemption. Corruption will be easy to get away with. Some may even say… incentivized. I guess that’s kind of a win for self-employed individuals and small businesses though.

The Act caps the tax exemption at $25k of (reported) tip income, and is also restricted to employees who earn less than $160k. Most servers don’t report their cash tips anyway. I didn’t. Come get me feds!

But the feds already knew this. So who is this Act for?

Feels like the only winner here is the employer and the political leaders who want to look good at face value.

One small step for hourly workers, one large step in the completely wrong direction.

Conclusion

Am I alone in thinking that employers should be responsible for the income of their employees rather than me? I don’t want service workers to think I’m not on their side, I want you to get paid, I just don’t think your pay should depend on unpredictable consumer generosity.

Also, I want clear cut prices. PRICE IT WITH YOUR CHEST. I love that you provide healthcare for your hourly employees, but I don’t need to see it as a line item on the bill. If you can’t justify the full price of your operations, that’s on you, not me. Don’t put a price on the menu but charge something else.

I haven’t finalized a solution on how to fight the system yet, I’ll let you know once I do, but learning the realities around it is a good step for everyone. It would have to be a bottom-up joint effort between employees and consumers, coming together to demand consistent pay from employers. I don’t see that happening just yet.

Maybe we could demolish the $2.13/hr federal subminimum wage for tipped hourly employees. That seems like a good place to start.