Taxing Tips

Question A: Exempting tips from income taxes will significantly improve wellbeing for tipped workers.

Question B: Exempting tips from income taxes will pull more people out of poverty than raising the tipped minimum wage to the overall statewide minimum wage.

Question A: Exempting tips from income taxes will significantly improve wellbeing for tipped workers.

Economist	Institution	Opinion	Confidence	Comment
Jonathan Andreas	Bluffton University	Uncertain	5	When Uber began to allow tips, that increased the supply of drivers and the average hourly pay didn't change although it changed the kinds of rides that drivers seek and some drivers are better at getting tips than others, so the composition of rides changed. I expect that boosting the value of tips will also have little average effect because most employers can reduce wages and/or require tipped workers to stay longer hours when there is less to do, so employers will reap much of the benefit, but some workers will probably benefit a little bit.
David Brasington	University of Cincinnati	Agree	8	they already under-report so the gains are attenuated
Kenneth Fah	Ohio Dominican University	Agree	9
Will Georgic	Ohio Wesleyan University	Agree	7	Exempting tips from income taxes will increase post-tax income for tipped workers, but if only the state income tax is lifted for tipped workers, then I am not sure that I would call a ~3% increase in income "significant".
Bob Gitter	Ohio Wesleyan University	Agree	9	Low-income tipped workers are not paying much, if any, income tax. The benefits will be for higher income tipped workers, e.g. servers at higher priced restaurants
Nancy Haskell	University of Dayton	Agree	8
Michael Jones	University of Cincinnati	Strongly Agree	8
Charles Kroncke	Mount Saint Joseph University	Agree	10
Bill LaFayette	Regionomics	Agree	7	In some cases. See the comment below.
Trevon Logan	Ohio State University	Disagree	7
Joe Nowakowski	Muskingum University	Uncertain	10
Curtis Reynolds	Kent State University	Disagree	5	I am sympathetic to low wages of tipped workers and the very real problems of tipping (bias, low amounts), but I am not sure that this will really help at all. Some tips may not be declared on taxes in the first place (so exempting them does not help) and this may just slow wage growth if employers view this as an increase in total compensation. Finally, low levels of income are currently not taxed at high levels.
Ejindu Ume	Miami University	Agree	9
Andy Welki	John Carroll University	Agree	9
Kathryn Wilson	Kent State University	Uncertain	5	Many tips currently go unreported so no taxes are paid on them anyway. Employers may respond to the policy by paying lower wages (or not increasing wages as much as they otherwise would have) over time. Since tips are less reliable than wages, this could result in workers having greater uncertainty about how much they will earn from week to week.

Question B: Exempting tips from income taxes will pull more people out of poverty than raising the tipped minimum wage to the overall statewide minimum wage.

Economist	Institution	Opinion	Confidence	Comment
Jonathan Andreas	Bluffton University	Strongly Disagree	9	The minimum wage increase would have a MUCH bigger effect for several reasons. First, it would be a $5.40/hr increase whereas nobody under the poverty line could get a $5.40/hr tax cut on tips alone (=over $10k/year for a full-time worker in tip tax)! Plus, the minimum wage increase affects all tipped workers at the bottom of the pay scale whereas the the tax cut would barely affect the poorest workers who pay zero income tax and the biggest benefits would go to the highest-income workers. It may cause lawyers to start asking for tips!! If the tip exemption also includes the payroll tax, then the poorest workers will merely be losing social security income which will increase poverty later in life because the return on social security taxes is relatively high for the poorest workers. The main danger of a high minimum wage is higher unemployment, but historically, the negative effects have been very small and particularly at times like now when unemployment is very low.
David Brasington	University of Cincinnati	Disagree	9	they already under-report so the gains are attenuated
Kenneth Fah	Ohio Dominican University	Uncertain	6
Will Georgic	Ohio Wesleyan University	Strongly Disagree	7	The number of tipped workers in Ohio who are both in poverty and pay income taxes is vanishingly small. Exempting tips from income taxes will do very little to pull people out of poverty. Roughly doubling the tipped minimum wage to coincide with the overall statewide minimum wage will be much more effective at reducing poverty in a partial equilibrium sense. However, the ultimate effect will depend on how much of this increase in labor costs for employers is passed on to consumers and on the own-price elasticity of services provided by tipped workers.
Bob Gitter	Ohio Wesleyan University	Strongly Disagree	9	Neither one will have much effect. The minimum wage affects very few workers and it is higher income tipped-workers who will benefit from this change.
Nancy Haskell	University of Dayton	Disagree	6	Approximately 1/3 of tipped workers are in zero income tax bracket so removing taxes on tips does not help pull them out of poverty, while raising the tipped minimum wage would. However, raising minimum wage for tipped workers might result in a substantial decrease in the generosity of tips, which could hurt tipped workers in their overall earnings.
Michael Jones	University of Cincinnati	Agree	5
Charles Kroncke	Mount Saint Joseph University	Strongly Disagree	9	The sub minimum wage is significantly below the minimum wage. If the wage for tipped workers is raised to the minimum wage, employers will hire fewer tipped employees. This will make poverty worse.
Bill LaFayette	Regionomics	Uncertain	5	It depends. Tips are probably much more a factor for waitstaff in fine dining restaurants than those in diners and coffee shops. Some of the former could possibly be pulled out of strict poverty (but not necessarily up to a true living wage) but many of the latter would probably be better off with wages at the non-tipped minimum.
Trevon Logan	Ohio State University	Disagree	7
Joe Nowakowski	Muskingum University	Disagree	5
Curtis Reynolds	Kent State University	Disagree	8	I believe the bigger issue is that some people are not actually making enough in tips to meet the stated minimum wage for non-tipped workers. If so, that is a very real problem and likely varies across demographic groups. And, since taxes tend to be low for these workers, it is more important to increase income than decrease tax burden.
Ejindu Ume	Miami University	Disagree	8
Andy Welki	John Carroll University	Uncertain	7
Kathryn Wilson	Kent State University	Strongly Disagree	9