Waiters, waitresses, and other service-sector employees have to pay taxes on the tips they earn. Currently the IRS makes an estimate of how much each service-sector worker will make in tips during the hours they work. The IRS then taxes them on that amount, even if the worker does not actually earn as much as was estimated!
The IRS has set up an estimated tax schedule for different work places. For example the IRS says that your estimated wages for where you work is $22 an hour. That is what you will be taxed on, no matter if you get a good or bad section, or what time of year it is. So if you work a 4 hour shift, the IRS assumes you made a minimum of $88. They tax you on $88. But what happens on a slow night or during the slow season here in Vegas. You only make $60 bucks, but are taxed on $88. Oh and you have to tip out $20. So you made only $40 net. But the IRS is going to assume that you made $88 no matter what, so you are basically paying double taxes on your labor for that day.
The reverse could happen as well, where you could make $200 in a shift. You would have an advantage that day. But can you really just estimate with people's livelihood. And how many really good nights do you have in the service industry vs. slow ones? I believe this is criminal!
The tips of many service-sector employees are a substantial portion of their income, many workers are students just trying to make a few extra dollars to get through school, and others are often parents balancing two jobs while trying to make enough to raise their family. Tax on tips amounts to nothing more than the federal government stealing money from these employees for working hard and doing their jobs. Tips are a gift for service well done, not a wage!
Last year, Ron Paul introduced H.R. 3664 in Congress to end this problem. The Tax Free Tips Act of 2007 will exempt tips from federal income and payroll taxes. Ending taxes on tips will give workers an immediate pay raise, letting them keep more money to put toward things like a house or car payment, their retirement, or education. I support this bill and would introduce similar legislation like this to support the service-sector employees of Clark County and the country.
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