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January 31, 2015

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Guest column:

Ron Paul: Stop taxing tips


Leila Navidi

Republican candidate for president Ron Paul talks during an interview at the Venetian Tuesday, October 18, 2011.

During any presidential election year, taxes are sure to be a large part of the debate. That’s especially true during these tough economic times.

One side argues that high-income earners aren’t taxed enough and advocates higher taxes on this group to balance our budget and get our economy moving.

The other side argues that taxes are too high and advocates for lower taxes on businesses, high-income earners and virtually all Americans as a way to stimulate our economy.

But there’s one sector of American workers who are often overlooked by both sides during the never-ending debate on taxes.

That’s service-industry workers, who, despite often being underpaid and overworked, are always overtaxed.

According to the Nevada Department of Employment, Training and Rehabilitation, there are more than 300,000 service-industry workers in Nevada — nearly 30 percent of the entire state workforce, which is larger than any other sector.

The truth is the majority of service-industry workers are paid low hourly wages and are expected to earn the rest of their income from tips. However, unlike regular wages, a service-sector employee usually has no guarantee of, or legal right to, a tip. Instead, the amount of a tip usually depends on how well an employee satisfies a client. But even good service doesn’t always guarantee a tip — especially during tough economic times.

Not only that, but tips provide a substantial portion of the income of many service-sector employees, many of whom are young people just trying to make a few extra dollars to get through school or single parents often balancing two jobs while trying to make enough to raise a family.

That’s why it’s an outrage that waiters, waitresses and other service-sector employees have to pay taxes on the tips they earn. And to add insult to injury, the IRS makes an estimate of how much service-sector workers will make in tips and taxes them on it even if the taxpayer did not actually earn as much as the IRS estimate!

This is a serious problem that must be addressed, but I’m the only candidate running for president who is working hard to fix this problem.

In fact, I’ve introduced the Tax Free Tips Act in Congress, which would exempt tips from federal income and payroll taxes, meaning no more taxes on tips. That’s because I understand ending taxes on tips will give these workers a pay raise, letting them keep more money to put toward things like a house or car payment, their retirement, or their own and/or their children’s education.

If elected president, I will end this injustice on service-industry workers all across our nation by abolishing all taxes on tips once and for all.

Helping Americans improve themselves by reducing their taxes will make our country — and our economy — stronger. I think that’s something we all agree must happen if we are to fix our economy and get America back on track.

Ron Paul is a 12-term congressman from Texas. He is running for the Republican nomination for president.

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  1. Income Taxing in the U.S. is a voluntary act. It can not be a forced or taking tax because that would make the government a criminal and since we are the government we can't all be criminals. No law or amendment to the Constitution can make taking property by force an innocent event. It is criminal no matter who does the taking. If tax collectors carry guns then it is assumed they are going to take the so called "tax" by force. In the law that is called armed robbery. On top of all that a tip is a gift and even the tax code lays the burden of a tax on a gift to the giver. The recipient of the gift is never taxed. I never give a tip. I only give birthday gifts to people who wait my table. I don't care if I am late or early with the gift. Vote for Ron Paul who wants us all to pay zero income tax. The only honest income tax.

  2. Most tips in major casinos (as an example) are pooled, and divided amongst ALL the hourly employees in the department (Table Games, Slots, etc.) The IRS has been using automatic withholding on estimated tip earnings for years and years. This began when dealers, cocktail servers, etc. tried to game the system by not claiming what they were really making in tips. Where was Paul when the IRS began this procedure? As for Income Taxing in the U.S. being "voluntary" LOL. Try not paying your taxes and see how that works out for you. It isn't and never has been "voluntary"

  3. If the Tax Free Tips Act were ever passed my immediate response would be to reduce the amount I am tipping. I too need additional funds to put toward things like my house or car payment, my retirement, etc...

  4. Didn't Wesley Snipes test your theory? How did that work out for him?

  5. I suspect few employees actually claim the real tips they make, rather they take the government estimate. Lets face it if there was no money in the jobs they would not do it, check out crop pickers for instance, not many apply for that job they have to bring in people from Mexico. I am guessing those underpaid tip workers are making their share of the cash and you do not need an real education to earn this kind of money, only hustle..

  6. RE David K. Ron Paul may have been fighting all along to not tax tips as income, however he is one lonely voice in the wilderness. His proposed bill has NO CHANCE OF EVER BEING ADOPTED OR PASSED, and if it was passed in the house, it would be DOA in the Senate. As for Income Tax, I recommend you read the 19th amendment to the US constitution. You have the right to not pay withholding on your wages and any other sources of income, and the IRS has the constitutional right to come after you at the end of the year. Deal with it. All income is reported to the IRS: wages (including tips),income such as dividends,interest,capitol gains, and on and on. Fair or not, the IRS gets this information from your employer, your bank, any companies that pay you interest or dividends, and the list goes on. Nobody "controls" me. I accept and pay any tax liability I owe. I make money on dividends, interest, government retirement,and social security. Why should I not pay what I honestly owe? I live quite comfortably. My taxes are paid for 2011, and I am getting a refund. I am a retired happy camper who believes there's no free lunch when it comes to taxes. I PAY THEM, AND MOVE ON!!!

  7. RE Peter Fritz. Most toked employees in casinos have no say in what they make in tokes. The tokes are dropped in a toke box when received, and collected at the end of their shift, placed in a locked "bank" and normally tallied at the end of the 24 hour period that they were collected. Hustling is prohibited and has been for as long as I worked in the casino biz (23 years), beginning in 1988. The old school hustling, and every man for himself, is long gone, and good riddance. No customer wants to be hustled for a toke, and the current system makes it an even distribution of monies collected as tokes. If the total tokes an employee makes exceeds the IRS estimate, good for them.

  8. I am not a ron Paul fan. But I do agree with him on this issue. Tipping is not a guaranteed income. I have food servers that have been stiffed on a $600 bill or greater,so by taxing that food server on a un-realized financial gain is forcing a employee to occasionally have to pay for the privilege to service a guest is obscene.

  9. Regarding my post at 1529 hours. It is the 16th amendment to the US constitution that refers to income taxation. My bad.

  10. Next opinion.

    Around $13 thousand from 2010. Personally I believe in a flat total tax rate of 20% from $25 thousand up and a 5% sales tax that would at least get some tax revenue from the poor and say service industry personnel who may escape reporting all there income from non-guaranteed tips. Just a idea.

  11. I really like Ron Paul and would vote for him. Although I do disagree about paying taxes to a small degree. I believe in paying tax for our millitary and a keeping up on national parks. Other than those, most of my tax dollars is flushed down the toilet to bail out millionaire bankers for loosing money and crashing the ecconomy. I do not like paying taxes for the government to tell me how to live my life. Military and national Parks I'm willing to pay for. 99% of the other programs are bs.

  12. "And to add insult to injury, the IRS makes an estimate of how much service-sector workers will make in tips and taxes them on it even if the taxpayer did not actually earn as much as the IRS estimate!"

    Insult to injury? Really?? I'm a tax professional, and know many "service-sector workers" who are subject to the TCA ("tip compliance agreement") that the employer and the IRS agree to (it is not an IRS estimate, but an amount agreed to with the IRS AND the employer). I have yet to see a single example of the TCA amount being more than the actual tips received. In my experience, in every case, whether it be waiter, cocktail waitress, dealer, valet, etc., the TCA amount has always been less, often significantly, than the actual tip income.

    Whether to tax tips or not is a valid question. But to assert, as Rep. Paul does, that these workers are being taxed on more than they receive is factually incorrect, and more than misleading.