Interesting article on U.S. Tipping

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I think there is a direct correlation between social injustice and (lack of) social mobility and tipping. I doubt US folks are tipping their GP or Dentists or a CEO of a business they like. If you are a doctor, even less competitive compare to others, you will still make good living without getting any tip your entire life by just doing your job.
Why the least fortunate has to be more competitive and work harder to make living? I lived 15 years in Finland and Denmark, and 10 years in Germany as an expat. These are all lesser tipping countries. Yet they share the top positions consistently on global competitiveness reports along with US. If the quality of the services and output is the goal, there are many ways to achieve it. Money is a poor motivator. BTW, if you need to pay for people to do their jobs properly, only rich will get better service.
I tip well in places I know that hard working folks barely make living and I always tip anonymous because I do not want to get better treatment because I tipped.
 
I agree.

For those who aren't familiar with this, in the US our tax authority, the IRS, classifies certain employees as "tipped employees," which allows the employer to pay them as little as a special "tipped minimum wage" that is lower than the regular minimum wage. As I see it, under the US system there is a sort of tacit agreement among employers, employees, and yes, we the customers, that the employer pays part of what the employee is worth and customers pay the rest in "tips." In effect, we the customers are expected to make up that portion of tipped employees' fair compensation that is not paid by the employer. Not tipping in the US is, in effect, taking away from the employee what we the customers are expected to pay as our fair share.

The "tipped employee" rationale is only one of several rationales or theories that explain the practice of tipping, and others have been mentioned in this thread. This particular rationale does not translate well outside the US, where many customers assume (not always correctly) that the people providing them services are paid, and at more or less market wage rates. It seems that in some cases they are paid well and in other cases they are not paid at all. In some places that have adopted the practice of tipping, employees are already fully paid by the employer--presumedly the market wage that prevents the employee from seeking a higher paying job--and a tip is pure windfall for them. We can research what the local practice is where we are, but in the end it's still much of a guessing game as to what to do to be fair to all.
Interesting. This all seems like one big plot to avoid paying taxes (apparently 'agreed upon' by all parties - willingly or do they actually have a choice?). Knowing this will make me kind of sorry for the employees (not earning a 'living wage', but a 'tipping one'). But leaving it up to the customer to compensate? How is this my fault as a customer? Why should I compensate for that? It seems unfair to the customer to - besides the service of product they pay for - also have to pay for some kind of tax avoidance scheme... That is ridiculous.
 
Tipped employees do have to pay taxes on tips received.
 
But leaving it up to the customer to compensate? How is this my fault as a customer? Why should I compensate for that? It seems unfair to the customer to - besides the service of product they pay for - also have to pay for some kind of tax avoidance scheme... That is ridiculous.
I agree it's all ridiculous, and I hope someday the US can change the system. At least change it by calling the 20% a "service charge" and adding it to every bill, with NO expectation of an additional tip. It is especially problematic where customers are foreign visitors who do not understand the US system (and should not be expected to understand it). IF everyone understood that it is "up to the customer to compensate" their server for part of the total value of the service directly through a "tip" then it wouldn't be a problem. It would just be a ridiculous system that we all play our part in. But how can everyone, even native-born US citizens, be expected to grasp how it works? There are people who reduce their tips to "punish" poor service, when it would be more appropriate, in my opinion, to tip the full 20% and at the same time make sure the employer is aware of the poor service.

As Marie pointed out tipped employees do owe tax on tips. However, it has long been common for employees who receive tips in cash to under-report how much they received. And employees have enjoyed that. Now that payments, including tips, are increasingly paid electronically, maybe tipped employees will warm to the idea of getting rid of this system.
 
Tipped employees do have to pay taxes on tips received.
Well, this is the point for me.
How can tips can be proven to the tax authorities? And, furthermore, how can I, the customer, have tax-compliant proof of the tips I paid, so that I can ask to be refunded by my employer when traveling for work? Please notice that I travel abroad almost entirely for work, not for pleasure (I am not rich enough for affording vacations in remote locations).
This also applies to diving travels (I am a scientific diver, and previously I was a professional instructor, so I was always abroad "for work", even in diving trips).
Adding the tip to the credit card transaction is of some help, but in my country a credit card payment is no legal proof, we need an official fiscal bill. And that usually does not include the "service" charge.
I appreciate places where instead "service" is explicitly shown on the bill, as this will be refunded to me without problems. When instead there is no mention of it in the bill, just on the credit card receipt, I get no refund.
Also if the bill lists it as a "gratuity" I get no refund. The bill should describe it for its real nature, I am paying for the service provided, I am not making a gift, as this payment is substantially mandatory, so it cannot be described as a "gratuity"...
I have nothing against the "tipping culture", it is just a different way to pay workers, and that is perfectly acceptable to me. What is not acceptable is that this payment is made outside the normal accountability methods, traceable by the tax office, so that money comes out directly from my pockets, and not from my employer...
 
OK... So what is the benefit for ANYONE in this system? I don't see it.
I suppose that they "should" pay taxes, but they declare much less than their real income, as the payment of tips is mostly not-traceable by the tax authority.
 
So it is a tax avoidance scheme: deliberately making it a cash system, so it's harder for the IRS to prove someone has not declared a specific sum....
 
So it is a tax avoidance scheme: deliberately making it a cash system, so it's harder for the IRS to prove someone has not declared a specific sum....
Exactly.
But also making it difficult for people like me to being refunded for the tips paid when traveling for work...
That's the main reason for which I complain. If the payment was made mandatorily traceable to the tax authority, with a formal official receipt, then everything would be perfectly fine with me.
Adapting the amount of "tip" to the quality of service received is perfectly fair.
I find very disturbing seeing people not paying taxes. Without taxes the society could not work: no police, no firefighters, no schools, no universities, no hospitals, no roads, no bridges, no Internet, no electrical grid, no drinkable water, nothing.
Employees, like me, cannot evade taxes, as they are applied directly on my wage by the employer. Instead, when I see that some category of workers can easily evade taxes, this upsets me.
 
For me, it's all fine that 'they' have some kind of scheme going on. But don't expect me to fill in the gaps with cash.
If someone goes out of his/her way for me, (s)he can expect gratitude in the shape of a tip. But I won't be very happy being at the worst end of a deal I did not agree to.
 
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