Would you abolish taxes on tips?

Abol­ish­ing taxes on tips is a prom­ise made by both US pres­id­en­tial can­did­ates. Based on where you are, and your exper­i­ence of tour­ism and hos­pit­al­ity, what do you think of the policy?

It’s a “Good Tour­ism” Insight Bites question.

Your cor­res­pond­ent put the ques­tion to the travel & tour­ism stake­hold­ers in the “GT” net­work, invit­ing responses of no more than 300 words. (You too can join the “GT” net­work. Register.)

Thanks to the five respond­ents — pro­fess­ors, pro­fes­sion­als, prac­ti­tion­ers — who took the time to share their thoughts on the ques­tion. Their answers appear in the order received.

And thanks to Richard But­ler for his “GT” Insight BiteX, and Rieki Crins for her “GT” Travel Exper­i­ence. (You too can share your opin­ions and inspir­a­tions with “GT”.)

‘And an end to fossil fuel subsidies’

Geoffrey Lipman, President & co-founder, SUNx Malta 

Why not add “And an end to fossil fuel subsidies”?

If you are put­ting in a tax break to appeal to a minor­ity who may be poorly paid, why not go a step fur­ther and help save everyone!?

SUNx Malta is a val­ued “GT” Part­ner.

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‘Go after those who don’t pay taxes at all’

John Morris Williams, Group General Manager, Sanakeo Boutique Hotel & Flora by Sanakeo, Laos

My view here in Laos is that there should be no taxes on ser­vice charges. They should go after those who don’t pay taxes at all.

SVC is for our staff who work hard to show their guests from all over the world that Laos is a great des­tin­a­tion to visit.

When our staff serve cus­tom­ers and go above and bey­ond the call of hos­pit­al­ity, should part of their income be taken away?

It’s hard enough for them to live in a nice man­ner with the infla­tion; not to men­tion the bullsh*t infla­tion when loc­al vendors of loc­al pro­duce blame the Thai baht (THB).

It seems everything we touch is taxed time and time again!

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‘Fair and appropriate pricing is much preferable’

Richard Butler, Emeritus Professor of Tourism, University of Strathclyde, Scotland

This is an unim­port­ant issue, except to those who rely on such tips for their income. 

Firstly, in the cur­rent con­text it only applies to the USA, where tip­ping has reached an absurd level com­pared to most oth­er coun­tries, and is there­fore irrel­ev­ant to most of the world. 

Secondly, it will make little or no sig­ni­fic­ant dif­fer­ence to tour­ists or tour­ism. Most tour­ists are more wor­ried about wheth­er they should tip or not, and, if they decide to tip, what is an “appro­pri­ate” level for the coun­try they are in. 

In gen­er­al tip­ping is a mine­field. I think most people would prefer the situ­ation in New Zea­l­and, Aus­tralia, and Singa­pore at least, where tip­ping is gen­er­ally unex­pec­ted or min­im­al and treated as option­al; at times even insulting. 

Fair and appro­pri­ate pri­cing is much preferable.

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‘Tips are a lifeline for many workers’

Shamiso Nyajeka, Head of Department, Kirirom Institute of Technology, Cambodia

At the end of my first month work­ing in pas­sen­ger ser­vices at Zim­b­ab­we’s busiest air­port, I felt a deep sense of accom­plish­ment. As I pulled a small stash of notes from under my mat­tress, everything sud­denly seemed worth it.

As the new­est team mem­ber, I was assigned to handle wheel­chair pas­sen­gers. Being small-framed, I often found myself awk­wardly push­ing people twice my size. My heart raced as I gripped the wheel­chair handles, espe­cially when nav­ig­at­ing the steep ramp to the arrivals hall. Some wheel­chairs had faulty brakes, and I con­stantly feared los­ing control. 

Many pas­sen­gers looked at me with con­cern, ask­ing, “Are you sure you can do this?” or “Why don’t they give this task to the men?” But after safely deliv­er­ing them through immig­ra­tion and bag­gage claim, their heart­felt thank-yous and tips made it all worthwhile.

That first month, I saved nearly $250 in tips, enough to sup­port my exten­ded fam­ily. In many Afric­an cul­tures, this is known as “black tax”; an unspoken oblig­a­tion to care for fam­ily without dis­tinc­tion between ‘imme­di­ate’ and ‘exten­ded’. Though they are small ges­tures of appre­ci­ation, tips are a life­line for many workers.

While my tips were not taxed, I can only ima­gine how dev­ast­at­ing it would have been if they were. I am sure my col­leagues and many oth­er front­line work­ers would have felt the same way. Taxes would have sig­ni­fic­antly reduced our abil­ity to sup­port our families.

Though the Amer­ic­an con­text may dif­fer, front­line work­ers every­where share com­mon ground: they work tire­lessly, often under chal­len­ging con­di­tions, to deliv­er excep­tion­al service. 

Abol­ish­ing taxes on tips isn’t just logic­al; it is essen­tial. Tips are more than a reward; they are a vital source of sup­port, and tax­ing them adds an unne­ces­sary bur­den to an already demand­ing job.

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‘Practical benefits may be limited’

Richard A Shepard, Trustee & CEO, Sustainable Rural Development International, UK

While the prom­ise to elim­in­ate taxes on tips is polit­ic­ally appeal­ing, and aims to sup­port ser­vice work­ers, its prac­tic­al bene­fits may be limited. 

Tips in the US are con­sidered income and should be declared. Are they? Who knows … but likely not, or not in full. 

This is a polit­ic­al and rev­en­ue issue. It has noth­ing to do with any­thing else in the US. The idea is to lift the fin­an­cial bur­den on approx­im­ately 4 mil­lion work­ers in tipped positions.

There are sev­er­al issues to overcome: 

• First, it requires legis­la­tion.
  • Har­ris couples her pro­pos­al with a min­im­um wage increase, and income lim­its to pre­vent mis­use by high­er earners. 
  • Trump’s pro­pos­al lacks details but aims to provide imme­di­ate relief to work­ers who rely on tips. (Don’t expect details from Trump. It’s just a polit­ic­al ploy.)
• Elim­in­at­ing taxes on tips will lead to sig­ni­fic­ant rev­en­ue losses for the fed­er­al gov­ern­ment; poten­tially $107 bil­lion to $250 bil­lion over the next dec­ade, depend­ing on details in the legis­la­tion. This raises con­cerns about budget defi­cits and fund­ing for social secur­ity and healthcare.
• Many tipped work­ers may not bene­fit. For instance, a work­er earn­ing a low wage sup­ple­men­ted by tips may already fall below the tax­able income threshold. Thus, exempt­ing tips from tax­a­tion may not change their oblig­a­tions at all.
• The policy could cre­ate inequit­ies in the labour mar­ket, favour­ing tipped work­ers over those in non-tipped pos­i­tions. It may encour­age employ­ers to shift com­pens­a­tion struc­tures towards tips rather than wages, fur­ther com­plic­at­ing wage fair­ness across dif­fer­ent sectors.

In Europe, tips are either not taxed or not fully declared. It has zero impact on tour­ists, even in the US.

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“GT” Insight Bite_X (‘_X’ is up to you)

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Mass tourism ‘more sustainable per capita than many other forms’

Richard Butler, Emeritus Professor of Tourism, University of Strathclyde, Scotland

Some 30 years ago a col­league of mine lis­ted 135 ‘types’ of tour­ism. I have no idea how many he would record today. Some — ‘altern­at­ive tour­ism’, for example — have just about dis­ap­peared from use. Many oth­ers have appeared.

While some are adject­ives describ­ing the activ­it­ies engaged in — ‘cyc­ling tour­ism’, for example — it seems an increas­ing num­ber are more ideo­lo­gic­al, or are focused on the “nature” or “appro­pri­ate­ness” of tour­ism. Many are new labels for old products. Some recent com­ments on regen­er­at­ive tour­ism make it sound like a ver­sion of ’slow tour­ism’ or ’agri­t­our­ism’. 

Aca­dem­ics do nobody any favours by com­ing up with new names for old niches. But it is easy for pro­ponents to hype “the fast­est grow­ing” — a doub­ling from two to four is not dif­fi­cult — to increase the use of the new term.

Over the dec­ades, some aca­dem­ics, myself included, have argued that mass tour­ism is not as bad as it is often painted; that it can be more sus­tain­able per cap­ita than many oth­er forms of tour­ism, par­tic­u­larly those requir­ing long-haul air travel. 

Mass tour­ism grows des­pite end­less cri­ti­cism from aca­dem­ics and travel writers. Many people want it. Mass forms of tour­ism are the only ones they choose to or can enjoy. 

Many des­tin­a­tions want it too. (Had developers and gov­ern­ments planned prop­erly, over­tour­ism might not be the prob­lem it is in many places.)

Tour­ism has bene­fits and costs, but cre­at­ing more forms, often in name only and with little pop­u­lar appeal, does noth­ing mean­ing­ful to solve its very real problems. 

Mak­ing mass tour­ism more sus­tain­able, as argued by myself and oth­ers includ­ing Weaver (2012, 2014), would be more effect­ive than try­ing to replace it with more expens­ive and some­times less sus­tain­able alternatives. 

Ordin­ary people eat­ing bread often seem hap­pi­er than the select few eat­ing cake.

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‘Thai people are the kindest in the world’

Rieki Crins, Founder of the Learning Exchange Foundation, Netherlands & Founder, the Bongde Institute of Hospitality and Tourism, Bhutan

Thai­l­and is kind of a second home for me. I have been vis­it­ing the coun­try for more than 40 years.

Although Thai­l­and receives so many tour­ists every year, I real­ise that most vis­it­ors have no clue about the etiquette and way of life of the Thai. This is a shame because they miss the essence of Thai culture.

Sadly, in the over­run tour­ist traps of the coun­try, the fine Thai cul­ture has been pushed away to accom­mod­ate vis­it­ors’ bad behaviour.

If you learn the real Thai cul­ture — open your mind and do not judge — a magic­al world will open. Avoid the tour­ist traps, and you will exper­i­ence a very soph­ist­ic­ated cul­ture … con­tin­ue read­ing at The “GT” Travel Blog

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What do you think about taxes on tips? 

In a com­ment below share your own thoughts about tips, taxes, or any­thing travel & tour­ism. SIGN IN or REGISTER first. (After sign­ing in you will need to refresh this page to see the com­ments section.) 

Or write a “GT” Insight or “GT” Insight Bite of your own. The “Good Tour­ism” Blog wel­comes diversity of opin­ion and per­spect­ive about travel & tour­ism, because travel & tour­ism is everyone’s business.

This is an open invit­a­tion to travel & tour­ism stake­hold­ers from any back­ground to share their thoughts in plain Eng­lish with a glob­al industry audience.

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If you think the tour­ism media land­scape is bet­ter with “GT” in it, then please … 

Featured image (top of post)

Would you tax tips? Pic by Sam Dan Truong (CC0) via Unsplash.

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