[gav]

I imagine that it would be along the lines of:

If you are a service worker earning less than $44,725 (the Federal 12% bracket) your first $10,000 of tips are tax free.

This would mean that an income of $40,000 including $10,000 tips would owe roughly $1,748 Federal tax vs. $2,820 tax.

[kurthr]

Which means that almost all tips would be taxed. Most tipped workers make over 30% of their income in tips, and certainly the highest tipped workers that pay the most taxes do. That makes not taxing the first 25% of tipped income which would only be taxed at or less than 12% has a very marginal effect.

Plenty of bar tenders make >$100k/yr with <$30k in non-tip income. Taxing "only" $60k+ of their $70k in tip income looks pretty silly. You're going to save them at most $1200 when their taxes are already well over $12k.

I just don't get why one would want to promote tipping culture with financial incentives, when it's already fairly exploitative of the workers.

[LorenPechtel]

And what exactly constitutes "service worker"??

Because a lot of professional stuff is considered service occupations.