If implemented nationwide in the United States, would a policy of tax-free tipping result in an increase in annual real wages of service workers by at least 10% within five years of implementation?
During the 2024 United States Presidential election, both the Republican campaign
of the former president Trump, and the Democrat campaign of Vice President Harris have signalled support for the idea of eliminating income taxes from tips for service and hospitality workers. The current legislation treats tips the same as regular wages.
Those in favour of tax-free tipping argue that tax-free tips benefit service and hospitality workers significantly by increasing their take-home pay. Service and hospitality workers are already some of the lowest-earning segments of the workforce, and improving their financial stability and quality of life overshadows the potential loss of governmental tax revenue. In addition, advocates argue that tax-free tips would also incentivize workers to offer a higher service quality.
Those against tax-free tips argue that the expected loss of tax revenue for the government is oversized compared to the benefit of helping a relatively small segment of low-wage workers (only 5% of bottom quarter of wage earners earn tips). Tax-free tips might also lead to lower base wages, as tax-free tips could incentivize employers to shift more of the compensation burden to customers, leading to a much higher loss of tax revenue for the government, greater income instability, and potentially even offsetting or negating the expected benefits to the worker.
If tax-free tipping is implemented, I will resolve this question based on FRED data and the U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics report, "Waiters and Waitresses" category.
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This market has a few issues:
The headline indicates a causal claim while the resolution criteria requires only a coincidental relationship
OEWS also only reports wages, not income
OEWS does not report a "service workers" category
You did not specify the measure (e.g. mean vs median)
You did not not specify a time this would have to occur
I would suggest deciding items 3 and 4 (see https://data.bls.gov/oesprofile/) and then revising the headline to something like:
If the US excludes tips from taxable income before 2026, will real mean wages for waiters and waitresses rise by at least 10% from 2026 to 2031?
@MaxGhenis This is very good feedback, thank you!
Will change the headline and description based on your suggestion.
Will change to mean wages.
True. "Personal Care and Service Workers" is a category, but doesn't have a perfect match for this question. Will use "Personal Care and Service Workers, All Other" category for this, albeit this is not ideal. Will think about this some more.
Specifying real mean wages now!
This was a limitation of the character-limited headline field, the full headline is in the description and specifies five years from the policy being implemented. :)
@sanyero Thanks for making these changes. I'd just suggest targeting the "Waiters and Waitresses" occupational category instead, as "Personal Care and Service Workers, All Other" also includes non-tipped roles like dog groomer and fitness instructor. See this o3 chat.