In college, many students flock to restaurants for work as waiters, waitresses, and bussers. For a long time, this system benefited everyone involved: College students were employed and restaurants had easy access to a renewable, energetic work force.
In fact, U.S. News & World Report went as far as to claim that being a waiter or waitress was the second best job for college students.
Unfortunately, it does not seem that this is going to last much longer.
In 2012 the IRS issued a rule that cleared up the definitions of service fees and tips. The rule states that auto-gratuities from big parties are actually a service fee and should be included on the employee’s paycheck rather than treated like a tip, which is usually taken home the night it is earned.
Although the policy was established in 2012, the industry lobbied and succeeded in delaying the implementation of the new rules until 2014. Since Jan. 1, restaurant chains have been experimenting with ways to handle the new IRS rule.
This past week, The Wall Street Journal reported that Darden Restaurant Industries (which owns restaurant chains such as Olive Garden) eliminated auto-gratuities on parties of eight or more in select locations. The strategy left the tip amount up to the discretion of the customer.
In a perfect world, there would not be a problem with this. However, we live in this world and it is more than common for a party of eight or more to receive a large bill and be far too skimpy with the tip.
As Heather Long notes in an article in The Guardian, it’s a fairly normal thing, especially with college students, for a group of friends to go out to a restaurant with a large party, get the check and pool scraps of cash together in order to pay for the whole bill. Without the gratuity added in automatically, the mindset of the group is off and these customers are merely trying to pay for the meals, much less the tip.
By getting rid of auto-gratuities, we may end up with minimum wage increases for servers. The Arizona Minimum Wage Act requires that employers pay their employees who earn tips no less than $3 below the minimum wage of $4.80, and the difference between the state minimum wage and wage paid must be made up by tips.
But the reality is that waiters and waitresses make most of their money with tips — and the money they make off of tips is immediate. Because they get tips at the end of their shifts, the amount is more certain, considering servers know exactly how much money they are walking home with that night. When it comes to the paycheck itself, the amount is not as concrete.
It would seem that the portion of the work force that generally makes $20,000 a year is the least of the threats that are posed to the U.S. tax system, wouldn’t it?
This focus on a relatively low-income work force is peculiar, especially when we are coming down from a summer filled with ruckus over the IRS's extra scrutiny of Tea Party groups applying for tax-exempt status (though some progressive organizations were scrutinized as well).
In these instances, the scrutiny is just. These organizations are handling large sums of money and have considerable political influence — powers that the average server could only dream of having.
By targeting a work force that makes significantly less than some of the most heinous tax offenders, the IRS is effectively avoiding its job of preventing tax fraud by those who intentionally do so and those whose avoidance has the most impact.
Reach the columnist at zjenning@asu.edu or follow him at @humanzane
