Hey Kamala and Donald -- here's a tip for ya!

If there's one thing you could probably get most Americans to agree on (and most Canadians too, but that's not relevant here), it's that tipping culture is completely out of hand. Pre-programmed tip amounts on payment devices in restaurants are going ever higher, with most now using 18 percent as a starting point; tip-shaming supposed cheapskates is rising, amid suggestions online that anything less than 28 percent is now entirely unacceptable; and the demand for tips is spreading into more and more workplaces, including some where actual contact between customer and employee is minimal. It's one malign consequence of the pandemic years that shows no sign of abating any time soon.

Now we have both major candidates for the Presidency saying they want to exempt tip income from taxation. Donald Trump suggested it first, but now Kamala Harris is touting the same idea.  And while it may play well on the campaign trail, from any public policy standpoint it's a truly terrible idea.

This article from CNN spells out many of the reasons why that's the case. Basically, the case not to do this comes down to the good old Law of Unintended Consequences.  One: eliminating taxation on tips directly reduces any incentive for employers to pay their staff a living wage. Two: in all likelihood it reduces the percentage that customers actually tip -- "hey, I've paid tax on this money that I'm tipping you, but you won't be paying tax on it, so it's only fair that I give you less, right?" Three: eliminating taxation on tips creates incentives for smart people to structure their compensation in order to take advantage. Ready to start tipping your investment broker? Just give it time. 

Alongside all of these potential downsides, there's the uncomfortable fact that most employees currently in receipt of tips don't earn enough to pay Federal taxes anyway, so there's very little point to all this. Any change in the taxation of tips would require the approval of Congress. The Presidential candidates may ride this dumbass idea right through election day, but it seems unlikely it will ever be implemented.