The Unsung Genius of the Rise of Tipping Culture
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Tipping has gotten a bad rap of late. Lots of op-eds and commentary more broadly from left and right about tips, and perhaps worse, the expectation of tips.

The view here is that critics miss the genius of soaring tip culture, and for reasons at least initially unrelated to tying money to service quality. The latter is seemingly a given, and explains why Americans are prone to tip even in countries (think England for instance) where tipping isn’t as much expected.

The true genius of tipping culture can be found in its impact on American thought: it familiarizes those in tipped fields with how long-fingered government is. Think about it. And in thinking about it, contemplate why members or the right in particular are so disdainful of tax withholding: the theoretically quiet (and automatic) nature of it somewhat shrinks the pain of paying taxes.

Conversely, imagine the perception of government and the cost of government if Americans had to send city, state and federal a check each and every month or twice a month? Put another way, imagine the perception of government if workers had to contemplate what they owed government once or twice a month, all the while thinking about what they could or could not spend in light of what’s owed to government?

With regular wages, taxes are withheld. Tips are extra, which means those in tipped fields face more taxes on tips. Though microscopic relative to what the rich pay, call the taxes an awakening of sorts.

To which some will not unreasonably point out that lower-wage earners pay very little tax as is. That’s surely true in a relative sense, but as evidenced by how pleased those in tipped fields are made by cash tips that are easier to hide from the IRS, taxes on tips are a burden.

Crucial about tips, whether in cash, on credit card or via the pad of sorts that we check out on in some stores, any tip not in cash is a reminder to those tipped that there are entities that view themselves as partners of ours when it comes to income. And given the frequency that those in tipped fields are actually - yes - tipped, the reminders of the size and cost of government are there all day and every day or night while on the job.

Consider all this through the frequent lament over the years about the progressivity of the tax system. The not unreasonable view of the rich taxed the most has been that to varying degrees and various ways, too many Americans don’t feel the crushing burden of taxation. Only for the rise of tipping culture to let everyone in on what an obnoxious partner government is, always and everywhere.

Which is just a reminder about the undeniable good of tipping: not only does it have those tipped constantly thinking about what they might “owe” for providing good service, it also has them wondering if the tips might be greater if those being served weren’t so overtaxed themselves.

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book, released on April 16, 2024 and co-authored with Jack Ryan, is Bringing Adam Smith Into the American Home: A Case Against Homeownership


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