But economists point out that the proposals would give a big tax cut to higher-earning servers — some of whom can earn six figures, nearly all of it in tips — while doing nothing for low-wage workers in the kitchen or in other industries. Even many tipped workers, like Ms. Mercer, wouldn’t benefit because they earn too little to owe any federal income taxes. (Tips are also notoriously underreported on tax forms, although experts say that is probably less true now than in the past, when most tips were paid in cash.)
The proposals could also have a subtler effect: encouraging even more tipping.
If tips aren’t taxed, workers should, in theory, be more willing to sacrifice wages for tips. Over time, that could lead more businesses to adopt tipping for more workers, said Ernie Tedeschi, a research scholar at Yale Law School who was, until this spring, a White House economic adviser.
“This proposal shifts the burden of compensation a little bit away from the wage side and toward the tip side,” Mr. Tedeschi said. That’s good for restaurants, whose costs will fall. But for workers, he said, “they’re going to make a little bit less in wages.”
That’s the opposite of what Isabella Crow would like. She works as a barista at a coffee shop in Ann Arbor, Mich., where she is a senior at the University of Michigan. Tips make up a big part of her earnings — $2.50 to $4 an hour on top of her $12.50 hourly wage — and she appreciates them.
But Ms. Crow, 21, would rather see the industry rely less on tipping, and doesn’t like the idea of a tax policy that would instead embed the practice further into the business model. And outside work, she would love to be asked to tip less often.
“I’m a barista here,” she said, “but a customer everywhere else.”