Restaurant Workers & Tips

I sometimes ignore American social news, but decided to have a whirl with Eyal Press's “No Tax on Tips” Is an Industry Plant, published in The New Yorker on July 28, 2025. 

In May 20 2025, The United States Senate passed the bipartisan 'No Tax on Tips' Act proposed bill by unanimous consent. A version of the bill was included in the 'One Big Beautiful Bill' Act and signed into law on July 4, 2025.

For a bill like this, I didn't just read this article. I also had rooted out more information on it to get a fuller sense of what this 'Tipped Employees Protection Act' bill is and how it's going to affect the industry. Congress has approved the legislative agenda earlier in the month.

Hmmmm. This is a bill pushed by Arizona. An employer must pay a tipped worker at least $2.13 per hour under the FLSA (Fair Labor Standards Act). A tipped worker is defined as someone who regularly receives more than $30 in tips per month. But there's a whole lot of Math underneath it that brings an employee's tips + wage to something not less than the federal minimum wage total. So you gotta count the tip credit. 

The legislation, if approved, would place an initiative on that November’s ballot to amend the Arizona constitution so that employers could pay tipped workers twenty-five per cent less than the state minimum wage, then $14.35 an hour. In Arizona, the minimum wage for such workers was already $11.35 an hour. The formula being proposed would allow employers to pay tipped workers just $10.76 an hour—a pay cut that would reduce a full-time server’s annual salary by twelve hundred dollars.

Now, we have this brand new bill signed into legislation. The name of the bill is an oxymoron. It kills me. Sure, no tax on tips, but when you read this bill and how it does the Math, you will blink. The best part is, all these changes are temporary and set to expire after 2028. LOL

Trump had earlier (on his campaign trail) promised to eliminate taxes on tips and overtime. His 'populist' policy is backed by the National Restaurant Association—probably because it won’t stop establishments from paying servers below the minimum wage. This is the National Restaurant Association, a group known as 'the other N.R.A'. But lobby groups aren't dependable. They push for their interests. 

Trump recently claimed that the idea of eliminating taxes on tips was inspired by an exchange he’d had with a waitress he’d encountered at a dinner in Vegas. “She happened to be beautiful,” he told a group of blue-collar workers who were invited to the White House in June. “And she looked at me—she said, ‘Sir, there should be no tax on tips.’ ” This was “the coolest thing I’ve ever heard.” The idea was included in Trump’s One Big Beautiful Bill Act, which he signed on July 4th; it was one of the few items in the package that some Democrats supported. Republicans released a video playing up the bill’s benefits for people like Peggy Weir, a waitress in Indiana who praises Trump for “fighting for the working men and women.” Many economists, however, consider the notion misguided. According to Yale’s Budget Lab, thirty-seven per cent of tipped workers don’t make enough money to pay any federal income taxes. Under the new law, casino dealers earning six-figure salaries with tips will receive large tax breaks, whereas busboys making poverty wages will get no benefit. And, though ending taxes on tips has a populist veneer, it won’t cost the owners of hotels and restaurants a penny. (This may be why Trump—himself a member of this class—embraced the idea.) The policy could even encourage employers to shift more kinds of work to tipped, subminimum-wage positions—thus reducing labor costs.

Going by the logic of this bill that has been signed into law on July 4, 2025 and set to expire in 2028, so if you get good tips, your employer can pay you a lower wage. Right. You can't have it completely tax-free. It's only applicable to federal income tax — you still gotta pay state and local income and payroll taxes. You just tahan till 2028 till some bigshot comes along to change the rules again.

I actually took out a pen to do some calculations on paper. I didn't just give it a think in my head. I had two columns. One, as a restaurant owner. Fantastic. But in the column of a worker, it's not looking great. I need to get more than $25,000 in annual tips, even across multiple jobs to get a tax relief up to $25,000. It doesn't make a difference to me unless I earn that much above minimum wage. 

This damn Trump populist policy. He's 'fulfilling a promise' huh. Arrrrrrrrrgh. 

We have no tipping culture in Singapore. But we should all be aware of how tips work overseas, and how those contribute towards beefing up minimum wage salaries, or adding crucial income to restaurant staff. To be frank, I don't even know if the 10% service charge imposed by cafes and restaurants, and hotels in Singapore actually go back to staff salaries or transport subsidies.