Thomas L. Knapp is a director and senior news analyst at The William Lloyd Garrison Center for Libertarian Advocacy Journalism, where this was first published. He lives in north central Florida.
During last year’s presidential campaign, Donald Trump and Kamala Harris seemed to disagree on quite a few things. One thing they agreed on — Trump reiterated his position in a speech in Las Vegas on Jan. 26 — is that the federal government should stop demanding income tax payments on tips.
Allow me to be the first person — well, probably far from the first —to say what a wonderful idea that is.
Usually the phrase “bipartisan agreement” raises the hairs on the back of my neck. When politicians from both “major parties” agree on something — anything — it’s usually terrible news for the rest of us.
“Bipartisanship” has given us everything from the warfare state to the surveillance state to the federal government’s “Make America East Germany Again” immigration approach.
But, if we’re going to have taxes (we shouldn’t) and if we’re going to have income tax (we shouldn’t) and if that income tax excludes your gift of up to $19,000 per year per recipient (it does), then common sense tells us that your 15% gift to a restaurant server or $5 gift to a delivery worker, etc., shouldn’t be taxed.
What are tips?
They’re not part of the purchase price.
You don’t have to give them, in any amount or at all.
They’re gifts.
But the federal government wants to have it both ways. If I put $19,000 in a box under your Christmas tree, no tax. If I add $1.90 to the cost of the burger you serve me, tax.
Libertarians have long recognized this scam for exactly what it is.
Advocates for Self-Government even offers a handy-dandy card for libertarians to leave with their cash gifts:
“THIS IS NOT A TIP! THIS IS A GIFT. IT IS NOT RENUMERATION FOR EMPLOYMENT NOR COMPENSATION FOR SERVICES. IT IS A GIFT — FROM ME TO YOU. AS A GIFT, IT IS NOT TAXABLE INCOME.”
Since I expect this policy proposal to take a little while (if it passes at all), I just ordered myself a supply.
I already make an extra effort to tip in cash rather than on a card so that, hopefully, my tips won’t be reported or taxed. So should you.
Ending the scam is a great idea. It’s basic decency and execution of the clear meaning of the Internal Revenue Code vis-à-vis “gifts.”
Naturally, some disagree. But they have to torture logic beyond repair to justify their disagreement.
At CNN, Alejandra Jaramillo, Kevin Liptak and Tami Luhby whine that ending taxation of tips would be “costly.”
Citing Republican members of the House of Representatives’ Budget Committee, they claim it would “cost $106 billion over 10 years.”
That claim requires a complete redefinition of the word “cost.”
The government taking less of your money doesn’t “cost” them that revenue difference, any more than me not burglarizing your house “costs” me a TV. Your money, and your TV, are yours, not the government’s nor mine.
Taxation, not nontaxation, represents “cost.”
The actual “cost” of eliminating income tax on tips would total $0.00.
Consider calling your congresscritter to clarify that point.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
