Both November 5th Presidential candidates have proposed eliminating the Federal income tax on servers’ Tips/Gratuities. One Candidate has further suggested doing this in combination with a raise in the National Minimum Wage. What is the potential downside to this which, on the surface, sounds appealing? Chef Andrew offers his informed perspective.
SoCal Restaurant Show
Ask the Chef with Co-Host Chef Andrew Gruel of Calico Fish House
- Hi, I'm Carla Hall of ABC's The Chew. You're listening to The SoCal Restaurant Show on AM830KLAA. - Who do you who? - And welcome back. It is The SoCal Restaurant Show, and we're here with you every Saturday morning from 10 AM until 12 noon, right here on AM830KLAA, the home of Angels Baseball. And you can also catch us on the AM830 Angels app. I'm Andy Harris, the executive producer and co-host to the show. It is our concluding segment, and at this point in the show, I'm always happy to bring on our co-host, Chef Andrew Grool of the Calico Fish House. Chef Andrew, good morning, and welcome back to your show. - All right, yeah, I'm here. - Well, you know, Chef Andrew, that is a good thing. Now, Chef Andrew, we don't like to get political here on The SoCal Restaurant Show because our listeners have a lot of opportunity for that elsewhere. What we do like to concentrate on though, our food politics, where it impacts hospitality folks and chefs and restaurateurs. So interestingly enough, both presidential candidates from both parties have proposed something new, and that proposal would be to eliminate the federal income tax on tips or gratuities. And one of the presidential candidates has added to that by suggesting raising the national minimum wage too. Now, that really doesn't impact California because we already have a minimum wage that's way above what the federal minimum wage is. But Chef Andrew, you're very clear-visioned, and you look at these things in a totality. And on the surface of it, it sounds really wonderful. Yeah, eliminate federal taxes on gratuities. Give us a more worldly point of view if you would. - Certainly, I mean, once again, being non-political, anytime we go into any election season and I hear a lot of grand promises from any party, I always take it with a grain of salt. - And the dash of pepper. - Yeah, dash of pepper, maybe a little harita in there, so yeah, that's my new space. But I looked up both of the policy suggestions. And to be honest, there really isn't much. Like, you can't find too much on this. So to brush this with a stroke that where I was able to get detailed, it wasn't directly from the candidates, it was like their economic advisors, or it was their surrogates speaking on their behalf. So I kind of cobbled together some pieces so I could understand the differences in both plans, right? 'Cause on the surface, it's just eliminate tax on tips. But frankly, it's not that easy. And I'll also take a step back and I'll say, I had talked about this, gosh, months ago on Cavuto when I think it was Trump who originally announced this idea and I said, yeah, sounds great, not gonna happen. And I don't mean to be negative, but look, eliminating tax on a specific segment of income for a particular industry, yeah, IRS isn't gonna go for that. And what you would have to do to go through the system. But let's play it out anyway, because I think that it shows some insight into both parties' ideas behind this. So on the Harris administration, what they're suggesting is that this would only apply to anybody making $75,000 or below. So above that $75,000 threshold, the elimination wouldn't go away. And it would specifically apply to the server, the tips on the federal side. The Trump administration's a little bit more gray, but he has said this would be universal regardless. There is no threshold in income. And that his idea behind eliminating tax on tips was also applied to the business. 'Cause I think a lot of people don't realize that the business also pays tax on those tips, federal income tax and state income tax or payroll tax rather. It's much higher on the state side, of course, the taxes. And there are certain rebates that you can get based on like tip credits. Those happen at the end of the year. And those rebates and credits are against any income. I kind of giggle at that, because restaurants aren't known for having too much income. So it's rare that a restaurant gets to kind of utilize those credits against income unless you're a much larger multi-unit corporation. On the Harris administration, the reduction or elimination would only apply specifically to the worker itself. So, between the two, those are kind of major blaring differences. But once again, I don't want to be a fly in the argument. I highly doubt this is going to happen because it's funny when I post about this, 'cause I wanted to get general feedback from my audience. It's very food focused and policy focused. Universally, right, across both parties, this wasn't like a partisan issue. They all were like, well, why does this industry get special treatment or preferential treatment? Why doesn't every industry get it? What is it specifically about this industry? So, that's really the overall objective analysis of the two policies. And I'll be curious to see if there is talk about it. But on a positive side, I will say this. Hey, at least our industry is getting a lot of national attention, right? And again, the restaurant and the hospitality industry right now, Chef Andrew, needs every friend it can get. But pragmatically, I also ask the question. For any of these tax cuts, regardless of what working class person is benefiting, as far as I know, we have a deficit that continues to grow, and the number is really hard to even get your arms around if you hear the magnitude of what it is. With these tax cuts, proposed tax cuts, where is the revenue coming from to the feds to make up for that? Or are we simply digging ourselves in a deeper hole? I mean, what am I misunderstanding there? Well, I think that's a philosophical idea, right? So on the one side, you're gonna say, "Well, you cut the taxes, "they have more money in their pocket, "so they're gonna spend more, "and therefore, as they spend more, "you're gonna make up for it in things like sales tax, "property tax, any good tax on goods," right? Because as we know, our money is taxed multiple times over, so the more money you have in your pocket, theoretically, the more tax there's gonna be. On the flip side, yeah, you can look at the grand deficit and say, "Well, now you're cutting revenue "and you have to make up revenue elsewhere." And that would take place in cutting programs, you know? And I think an important piece to mention in that regard, and typically what we see in government policy is a combination of both, right? Some cuts in spending and some cuts in, you know, cuts in spending and cuts in taxes. But what's really interesting, and something I bring up, is number one, you're right, the deficit makes up more than 50% of like all of our taxes go towards 50% is covering the deficit. Number two, and this is an interesting piece, especially for this show, over 20% of our entire budget goes towards health care, specifically chronic illness. - Let's do this, because this is not something we wanna rush. Let's pick up that conversation next week, because there's some important points to be made there, and I don't wanna give this short shrift. - Thank you, perfect. - So we will pick it up on the other side, and as always, thanks for your informed opinions. Food fans, that's our show. A tip of the talk to my co-host, Chef Andrew Grull. My thanks to Chuck here in Agile Stadium, in technical excellence. Koodles also to Adam Bell on social media. Right back here next week with a fresh show, we're proudly presented to you by Melissa's World Variety Proters, and West Coast Prime Meats. Doctors in the dugout with Alan Byer, MD takes the field next. Be safe and good eating. (singing in foreign language) (singing in foreign language) (singing in foreign language) (singing in foreign language) (singing in foreign language) (singing in foreign language) (crowd cheering)