Trump woos restaurant workers with a promise to stop taxing tips

Government Watch: Waffle House employees win a raise in the wake of union activity, and New York restaurants welcome a limit on reservation scalping.
Donald Trump
Trump made his promise at a rally in Las Vegas. | Photo: Shutterstock

Government WatchWelcome to Government Watch, a new Restaurant Business column focused on regulatory, legislative, labor and other governmental issues of relevance to the restaurant industry. This week: Donald Trump woos restaurant workers with a promise to stop taxing their tips if he's elected; Waffle House employees get a raise after union activism; New York restaurants win on reservations and temporary liquor licenses, but face new legal obligations.

Trump courts restaurant workers with a promise not to tax tips

With the election less than five months away, Donald Trump is courting restaurant employees by promising he’ll end the taxation of tips as income if he’s returned to the White House.

It was no coincidence that he aired the promise during a campaign rally Sunday in Las Vegas, where nearly half the 672,000 residents—302,000 individuals—work in the hospitality business, according to government statistics.

“We’re going to do that right away, first thing in office, because it’s been a point of contention for years and years and years,” the former president and presumptive Republican Party candidate in November said from the podium. “Those people that have jobs in restaurants, whatever the job may be, a tipping job, we’re not going after it for taxes anymore. This will be ended.

Trump estimated the crowd size at 20,000, but local media put the headcount at under 7,000.

The promise drew no public response from employers or the trade groups that represent him, since it’d largely be a non-issue to them. If anything, they could benefit from servers, bartenders and hosts keeping more of their tipped income, which the Internal Revenue Service regards as taxable income. For decades, the agency has strived to collect more of what tipped restaurant employees collect in cash gratuities.

Higher take-home for front-of-house staff would presumably cut turnover and ease upward pressure on wages. But Trump said nothing about how he’d end taxation on tips. Wages are usually the purview of Congress, with the IRS drafting the rules that put taxation laws into practice.

Employers might have been more concerned by what Trump dismissed a day later in full Trumpian style as a made-up report in the “Fake News Washington Post.” The story suggested that some members of Trump’s informal circle of advisors have aired the prospect of requiring all young people to serve in the military, as Israel and other nations mandate. That move would almost certainly drain young potential hires from the restaurant industry’s labor pool.

But Trump dismissed the notion via his Truth Social network as a “ridiculous idea” meant to “damage me with the Voters.”

“Just another Fake Story, one of many, made up by the DEAD Washington Compost!” he posted.

Waffle House servers are getting a raise that may or may not be a union’s doing

A union that claims to represent employees of the iconic Waffle House chain says tipped workers there are getting a raise this month of about $3 an hour, depending on their longevity and location. The labor group, Union of Southern Service Employees, or USSE, says the bump will bring the employer’s portion of their wage up to $5.25 an hour, provided tips make up the rest of their area’s minimum wage. Otherwise, Waffle House makes up the difference, as is usual with a tip credit.

USSE says the pay hike is the result of the pressure it’s put on the 24-hour chain for the last year. The group, which says it represents restaurant workers across all brands, cites such efforts as calling walk-outs and drafting a petition to stop Waffle House’s collection of a $3.15 meal payment from employees regardless of whether they eat during a shift.

The company, which did not negotiate the pay hike in usual collective-bargaining fashion, has not agreed that it was forced to raise its pay floor. In a video aired to employees, CEO Joe Rogers said the recast of Waffle House's pay structure had been in the planning stages for five years, with the pandemic proving a major delay. 

In any case, the USSE pledged to keep pressuring Waffle House for employee concessions. “The raises show that the company is feeling the heat,” member and Waffle House server Katie Giede said in a statement. “But they’re not nearly enough. We’re demanding $25/hour because that’s what we need to live. We need 24/7 security [in] stores. And we need the company to stop taking money out of our checks for meals, even when we don’t eat them. We’re going to keep organizing and keep fighting until we win.”

New York restaurants score two big wins, but may be enriching lawyers

The Empire State has become the first in the nation to prohibit the resale of restaurant reservations without the host establishment’s permission, a qualification the industry had sought with enthusiasm.

The trade notched a second legislative victory when the state legislature agreed to change a restriction that had lengthened new restaurants’ wait times for a green light to sell alcohol. By changing a key requirement for a temporary liquor license, an establishment will now have to stick with soft drinks for just three to four months, instead of about a year, according to the New York City Hospitality Alliance.

But not all the regulatory news out of the Big Apple has been positive for the business—or for media like Restaurant Business, according to Hospitality Alliance CEO Andrew Rigie. In an op-ed, he has accused third-party delivery services of trying to intimidate whistle-blowing reports on allegedly unfair pricing and treatment of restaurants by the likes of DoorDash, Uber and Grubhub. The mechanism, he said, is the subpoena. Using federal law, the services are subpoenaing the Alliance for all correspondence and interaction with news media that reported on practices that were subsequently curbed by the City Council, according to the association exec.

Complying with the request is a burden for an organization of the Alliance’s size, Rigie writes. He argues that third parties are trying to cow organizations into backing off from criticizing the services and lobbying against their interests.

The op-ed suggests that subpoenas might also be sought against media that reported on the issue. Restaurant Business has not been served or otherwise contacted in regard to the matter.

The services have filed a lawsuit to overturn a cap on the fees they charge restaurants. The Alliance nor Restaurant Business are part of that suit.

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