Taxes

I Gave My Waitress a 'Libertarian Tip': Taxation Is Theft!

A meme you can try at home.

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Have you seen the viral "libertarian tip"? Someone in Missouri left a cash tip with a note explaining it was actually a personal gift and so not subject to state and federal income taxes, and wrote "taxation is theft" in the tip line on the check.

Who knows if the note is authentic? "Taxation is theft," an old libertarian bromide, has in the last year or so become a fairly popular internet meme. By some accounts, the meme wars were an important aspect of the 2016 election and its outcome—and you can expect the trend of political memes to grow. Maybe the "libertarian tip" was staged by someone who wants to promote libertarianism or encourage others to leave libertarian tips, or even just someone who wanted to play with the "taxation is theft" meme.

Nevertheless, I went out to lunch today to replicate the meme so I could give you an authentic photo of an authentic non-tip left as an untaxable personal gift. Here it is:

Reason

Some tips for you: the original photo looked like a note, not an envelope. I thought putting the money in an envelope would more clearly separate it from a tip. A note is better to show off how much you've tipped—I put the money in the envelope after snapping the photo. You should probably make sure to have the change you need to give the tip you want. Asking for change from the wait staff might strengthen the case your untaxable non-tip is actually a taxable tip.

Afterward, I asked my waitress if my ploy would work. She seemed as if she wanted to tell me it would, even though she knew that it wouldn't, because, as she explained, tips are based off sales. She said that the tips that bring her wage up to the minimum wage (waiters and waitresses are generally exempt from minimum wage laws under the assumption tips get them to at least the minimum wage) get taxe like income, and that "40 to 50 percent" of tips beyond that get declared.

The intersection of libertarianism and wait staff is not new. During the 2012 election, then Rep. Ron Paul (R-Tex.), a Republican presidential candidate, became an "unlikely hero" (the New York Post's words) to wait staff for his efforts to pass the Tax Free Tips Act. In 2013, The New Yorker appeared to discover and bemoan that wait staff were hiding tips from the taxman. The horror.

Meanwhile, wait staff are also among workers most negatively impacted by higher minimum wages—they are often asked to do more work as restaurants look to mitigate the costs of a higher minimum wage in an already low-margin business. Just last month, Eric Boehm reported that San Diego had lost 4,000 restaurant jobs in the year-plus since they raised their minimum wage at an even faster pace than the state, which has so far only seen a slowdown in the growth of restaurant jobs.

And while we're so directly on the "taxation is theft" topic, here's one of my favorite chyrons ever on FreedomWatch with Judge Napolitano, a show I produced for. Thanks go to Media Matters for preserving the screen cap:

Fox Business

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  1. Yeah, that’s not going to go over real well.

    You’re going to have a lot of angry businesses paying out a higher wage because the tips earned didn’t meet the minimum.

    1. I don’t think you understand how server wages work, or at least not all over the United States.

      The government assumes you make ‘x’ in tips, even if you don’t, and that’s your tax burden. Supposedly you can challenge that assumption but I’ve never heard of anyone doing so (not that I’ve looked).

      I was a server for a minute or two in Texas, and this is how it worked for us. I would absolutely acknowledge that it might be different elsewhere.

      1. And yes, if you’re wondering servers usually go with the minimum amount the government assumes they made in tips instead of actually doing to the math and finding out if that’s at all accurate. I don’t think anyone actually checks, unless you’re audited I imagine, but auditing a server would mean the IRS agent would probably just say ‘fuck it’ since I’ve never known a single server who bothered keeping records.

        1. Right, but that’s the government, not the business.

          If your tips + tipped wage don’t reach the Federal minimum wage the employer has to make up the difference. That’s Federal law individual states may vary.

          Though as someone has already pointed out most tipped employees are generally unaware of the law and employers generally…frown upon not claiming the minimum.

          1. Federal minimum wage or local minimum wage?

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        2. How server tips ACTUALLY work:
          1] The bitter lady running the cash register totals out your credit card tips. You get paid this amount.
          2] The cash register also figures 8% of your total sales. You are taxed on this or the credit card tips, whichever is higher, for this day.
          3] The withholding on the taxable tips amount is accumulated for the week, and is deducted from your pitiful weekly wages check. It is not unusual to get a wage check like $13, or even owe money.
          4] Owed money is usually deducted from your tips on the next work day.
          5] “I am going to keep track and report my cash tips as income” said no waitron EVER.
          6] Everyone in the restaurant tips the bar 5%, and you tip your shared busperson 10% if you are dumb, 20% if you are smart, and they actually compete to be YOUR busperson and hop to water glasses and turning tables without you even asking.
          7] Details may vary, like at craphole diners where they force tip sharing and provide everyone with communist minimum service.

          So, if you want to help your waitron, write -0- on the tip line, and leave a cash tip. Better yet, press it into their hand with a genuine thank-you, which not only keeps it from wandering, but is unusual enough these days to start a memory, and possibly get you even better service on your next visit.

          1. So, if you want to help your waitron, write -0- on the tip line, and leave a cash tip.

            Keep in mind that if you do this, sometimes they’ll just try to add a tip to your credit card anyway.

            1. Which is difficult if you write zero on the ‘tip’ line and then write the total on the ‘total’ line.

          2. Your comment about forced tip sharing is funny. I remember the first place I waited tables did tip-sharing, AND cut in the snively owner’s son who was the “bartender” for an equal share. This was true even on lunch shifts when all he was doing was filling up sodas for us. Not that a bartender shouldn’t get tipped out for that, but I bet as the owner’s son he was already making a ton more than us! Seems like a quick and easy way to piss off your help.

            Anyway, the point was that my mom’s response to tip sharing was that “All the servers would automatically work harder and help anyone, even if it wasn’t their table, because they know their tips can be affected by anyone’s service.” Which I guess is true to a point, but it also enables moochers, obviously. And it erodes the feeling that you personally earned what you ended up with, while still retaining the feeling that you got shafted if you didn’t go home with good money.

      2. That’s what I’ve been told as well (I’ve never worked in a restaurant, but my brother and pretty much all of my friends have). And I think it’s an IRS thing. States with income tax may do something else, but I know nothing about that.
        Technically you are supposed to report tips beyond that assumed amount. But of course pretty much no one does this if they can avoid it. Credit card payments have made this more difficult, as tips are recorded. So leaving a cash tip is a nice thing to do, explicit libertarian message or not.

        I think that under minimum wage laws, employers do have to pay extra if the employee doesn’t make enough in tips to get to a certain amount. So it’s not fair to the employer to declare no tips at all.

        1. I know plenty of people in this industry, and most require their employees claim that amount or be fired. Even if they actually didn’t make it.

          The servers could sue, but most are too scared.

          1. Not really scared, just realistic. They don’t have the money to take on a restaurant in court for years that a typical law suit lasts when going up against people a lot richer than you.

            1. After a few years in, something like 90% of restaurant owners are not wealthier than many of their staff.

          2. Yup, I used to work at a place with a setup like that, so I can see how this meme would work at unethical restaurants. But for the ones who don’t have this policy in place, I guess my main issue with this gift idea is the Robin Hood feel to it. Assuming the server in question underreports and therefore does not make enough in tips to bring them up to the minimum wage, the minimum tax amount is still going to get paid by the employee, except now it’s essentially coming out of the employer’s pocket. And doesn’t being okay with the employer being forced to eat the difference, even if they can’t afford it, undermine a good chunk of our argument against raising the minimum wage? Maybe this is really dumb and someone who understands the economy/serving system better can explain why I’m wrong, but that’s just how I understand it right now.

            1. Not to mention undermining the principle against taxation. You’ve just switched the tax burden from the employee to the employer.

  2. OT, but my dad just sent me this.

    Hunger strike means leave to get food if you get hungry.

    On Tuesday, members of a Yale graduate student union, showing their grit and mettle, began a hunger strike outside of the university president’s home to force the university to start collective bargaining.

    That profile in courage was marred by one tiny detail: if a student got hungry, he or she was permitted to leave to get something to eat.

    1. I thought *one* Trigglypuff was annoying enough…

    2. This sounds like a Monty Python sketch.

  3. When is Reason going to have another Napolitano article up?

    1. Teach the Controversy!

    2. Just what we need, another pizza argument.

      1. YOU CANT PROVE ITS NOT TRUE!!!

    3. Never hopefully.

  4. Yeah, to quote the Geico commercial, “That’s not how that works, that not how any of that works.” A tip is still a tip no matter what you call it. In this instance the “ugly duck” is going to learn the hard way its still a “goose.”

    1. A tip is still a tip no matter what you call it.

      Crap! I’ve been misinterpreting the ‘Just the tip?’ euphemism the whole time!

      [tips whisky glass into mouth]

    2. Yeah, I thought that this meme was pretty retarded when I saw it on ‘Being Libertarian’ since it’s clearly a tip (it’s even written on the damn receipt, you fools). Ask yourself what the difference is between a tip and a gift while you’re inside their business receiving their services.

      Do people believe that they could walk into a store and ‘gift’ the owner money, and then they could ‘gift’ an item you just so happened to want from their shelves, and that this chicanery would then exempt the sales tax?

      Use your fucking brains people.

      1. In general, it doesn’t work. But in the case of restaurant service, it sort of does since leaving a cash tip makes it easier for them to under-report their tip income.

      2. A tip is obviously not wages because it is not paid by the employer. It is a voluntary reward for service between private parties. I’ve not researched the subject, but if the declared amount is subject to payroll taxes it clearly does not fit the definition (are restaurant owners kicking in their 7.65%?). If it’s only subject to the income tax it might be a legitimate claim by the parasites at the IRS but it sure looks like a gift to me. In any case the minimum wage exemption clearly distorts the market for everyone involved. It allows restaurants to shift their non billable hours onto their employees, Employees cannot count on a consistent income and must fake their declared income. Consumers get a lower sticker price but are left with the obligation of making someone else’s employee whole. I’m not advocating for a minimum wage I’m simply pointing out how parasitic government distorts what would otherwise be simple voluntary actions on the part of individuals.

  5. If I pay by credit card, I’ll add a cheapish tip and leave more as cash, to provide plausible deniability for the extra.

  6. “The Libertarian Tip” is my nickname at the massage parlor.

    1. Sorry, spambot, but that’s all taxable.

  7. Here’s a tip: Aim for the nerve stem, and put the bug down for good.

    1. Bugs are 86.6% combat effective if they lose a limb… at least according to Doogie Himmler.

  8. I think personal gifts are still taxable. Could be wrong though.

    1. Not below something like 14k.

      1. I think that’s the right number number. That’s what I’ve been going with.

    2. Personal gifts are taxable, but the giver is responsible for paying the tax not the receiver.

    3. Personal gifts are taxable but the giver is responsible for the tax not the receiver.

  9. Again I ask: is “Taxation is theft” is legitimate complaint for anyone who isn’t a full on anarchist?

    1. As Louis the XIV once said, “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

      I don’t even think one needs to be full-on anarchist to accept that taxation is theft, but also accept a certain minimal amount and still remain civilized.

      1. So what differentiates “good” theft from bad theft? Is it some sort of Rocket Racoon, “but what if I want it more than the person who has it?’ type thing?

        “I don’t even think one needs to be full-on anarchist to accept that taxation is theft, but also accept a certain minimal amount and still remain civilized” sounds like a cop out to avoid addressing the logical contradictions in your personal philosophy.

        1. It’s not a cop out at all. And I never used the word ‘good’ or ‘bad’ in relation to theft. I used the term ‘acceptable’.

          If something is taken from you against your will, it’s theft. I merely point out that one can accept that as a concept, but not go apeshit if the thief occasionally pulls a penny out of your change jar.

          Essentially, some hills aren’t worth dying on– as so many libertarians like to say.

          I believe an income tax is THE most immoral type of tax, primarily because it’s the most ‘thefty’ of all, and it also engenders a massive domestic spying and enforcement system. But we have it, and I’m not throwing bombs at IRS offices.

          1. Which are you arguing here?

            1. All taxes should be eliminated, I just accept I lack the ability to accomplish that goal
            2. Not all taxes should be eliminated, because accepting some taxes are a necessary evil to “remain civilized”

            You seem to be randomly flipping between the two.

        2. With “good” theft, you actually get something you may want at some point for the money.

    2. It’s cultural appropriation, is what it is!

      1. Okay, “Taxation is Cultural Appropriation” I will go with. =)

    3. You don’t have to be an anarchist to voluntarily pay for protection services, arbitration services, infrastructure maintenance, etc.

      1. I think there’s a question of anarchy as well.

        Presumably the government can and does offer some level of service(s) worth paying for. A more passive anarchist doesn’t exactly have a problem with people voluntarily communing, sharing resources, and achieving goals. At a low level, there’s little difference between a FedGov., Corporation, Cooperative, and a Commune. A more active anarchist, however, would have a moral problem with even this level of cooperativity.

        1. There is a fundamental difference between any type of government and any other type of organisation : the use of force to achieve its ends.

          1. “There is a fundamental difference between any type of government and any other type of organisation : the use of force to achieve its ends.”

            Ever been a member of a labor union?

            1. Are you implying a labor union isn’t a miniature government unto itself?

    4. No, you can want less theft.

      Though, if you consider theft wrong, then complaining about taxation being theft is a utilitarian argument of degrees, at best.

      But taxation is theft, and I’m not allowed to steal*, so I’m an An-Cap.

      *8th Commandment

      1. That’s the thing though. If a non-anarchist believes taxation is theft, then at some point they DON’T want less theft.

        1. I don’t understand why that’s the only possible outcome. There are other novel ways of funding government that don’t necessarily involved old-fashioned taxation. I’m not claiming they’d work or be effective- because they’re highly theoretical. Ie, I think one can accept the existence of some kind of state structure, but still believe that the simple method of extracting funds from your earnings is a form of theft.

          1. There is also the argument that while taxation is theft, no taxation is not necessarily the minimum possible amount of theft in a society.

        2. Stormy Dragon|4.28.17 @ 6:27PM|#
          “That’s the thing though. If a non-anarchist believes taxation is theft, then at some point they DON’T want less theft.”

          Bullshit.
          I’d rather not pay the cost of insurance, but I do knowing it has high possible future value.
          I’d have rather not gone to class in school, but I did knowing it had a higher possible future value than smoking a J.

        3. Wanting less theft and refusing to comply with unacceptable levels of theft is no different in principle from jury nullification or refusing to obey an unjust law. Are either of those only consistent with anarchism?

  10. 1) The IRS won’t buy that; it’s obviously a tip.

    Saying “it’s a gift, and just happens to be about 15% of the bill and to a waiter after service” doesn’t fool a single person anywhere, and it sure as hell isn’t gonna fool the tax man.

    That’s magical thinking almost like “a fringe on this flag means it’s an admiralty court and since my name is in all caps it’s not ME!”

    2) The IRS is gonna assume n% tips no matter what and assess tax on that, in any case, so …

    1. TIP: don’t believe tax law advice scribbled to you on napkins by strangers.

      1. TIP #2: Don’t believe tax law advice as given to you by IRS agents.

        1. I actually called my city’s treasury to ask if a fellowship stipend was taxable by the city. She didn’t really know the answer it seems, so she said ‘um yeah probably.’ So I paid; later found out no onelse I knew getting the stipend, so I am kinda pissed.

          New rule is: until I’m rich enough for the IRS to care about me, if there’s any doubt in not paying.

        2. Tip #3: As my wife (the family bookkeeper) says…”What you pay to the IRS is just an offer. They can choose to accept it or not.” (The rules are too complicated for even the IRS to understand, so it’s a good-faith offer, subject to someone else’s definition of good faith…)

          CB

          1. .”What you pay to the IRS is just an offer. They can choose to accept it or not.”
            I’m stealing that line. Your wife is a very perceptive. woman.

      2. TIP: I am sure that most waitresses and waiters already are more aware of the tax rules than Stormy Dragon and how much they have to claim.

  11. I live in Indiana where the minimum wage is $7.25 an hour. The place I used to waitress paid $2.14 per hour And the way tips were done was a little confusing.
    I would be required to claim tips as either my total credit card tips or 10% of my total sales which ever was higher.
    Lets just say a large party walks in and that is your only table the whole night.

    The party Spends $500 in food and leaves a credit card tip of 20% ($100) I must claim $100

    Or The party spends $500 in food and leaves a cash tip of 20% ($100) I could then claim $50

    so at $2.14 an hour and often getting stuck with 14 hours shifts (for simplicity lets not raise over time wage)

    2.14*14 = $29.96 per 14 hour day

    7.25*14 = $101.5

    So I have worked a 14 hour shift with no added over time so $101.50-$29.96= $71.54 that I would have to make in tips for the restaurant to not have to pay me more.

    its possible assuming you get at least 1 table every hour that ordered at least $50 in food and left a 10% tip

    then again you just worked your ass off for 14 hours for the bare minimum amount you would have made anywhere else. while being treated extra bad by a few tables.

    We won’t even add in the fact that some restaurants make servers share tips and others make servers tip out the host as well or the table busser . basically everyone.

    After going through all that I never leave less than 20% or $5 whatever is higher

  12. Isn’t that fat bastard the same guy who started the “Obama tapped Trump” horseshit that paused human progress for a good two weeks?

    1. Nap is imperfect, sure, but parts of what he said have panned out: the British did end up being part of the story

    2. Yep. Aren’t you the gay bastard who said claimed the president is a literal Nazi?

  13. My waiter friends tell me that employers will calculate the assumed tips based on gross receipts and then report that to the IRS.

    If you earn more than 15%, you can get away with underreporting, but not by much.

  14. “its possible assuming you get at least 1 table every hour that ordered at least $50 in food and left a 10% tip
    then again you just worked your ass off for 14 hours for the bare minimum amount you would have made anywhere else. while being treated extra bad by a few tables.”
    “We won’t even add in the fact that some restaurants make servers share tips and others make servers tip out the host as well or the table busser . ”

    So if a customer really appreciates your service and leaves a generous tip he ends up tipping the surly hostess who put him in the table next to the men’s room door. And if it’s an otherwise slow night, you end up working 14 hours for less than minimum straight time. And with the proliferation of digital money and government’s increasing hostility to cash the situation will worsen.

  15. RE: I Gave My Waitress a ‘Libertarian Tip’: Taxation Is Theft!

    “Have you seen the viral “libertarian tip”? Someone in Missouri left a cash tip with a note explaining it was actually a personal gift and so not subject to state and federal income taxes, and wrote “taxation is theft” in the tip line on the check.”

    No its not theft when the government steals.
    Its “redistribution of wealth.”
    Any socialist will tell you that.

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  18. Hey, is that note he left the waitress blue or is it white?

  19. THEY’RE GRABBING OUR TIPS!

  20. This is only slightly off topic, but I can’t stand tip shaming. Just thought I’d share.

  21. Advice to servers. If the joint requires “tip sharing”, keep very accurate records of what you have to put in the pot, report it all as income, and then report all the scavengers to the IRS, because you know they are not reporting all of the money. Retire on the reward money.
    Alternative number two, go on the dole.

  22. I thought James Weeks was the one giving us a “Libertarian Tip”

  23. The Treasury has specified any argument that “Wages, tips and other compensation received for the performance of personal services” are not taxable as being among “frivolous” positions that carry a $5,000 penalty under the tax code’s Section 6702.

    Just because you argue that your gift was not a tip does not mean that the IRS will not say it was materially similar to a tip, and therefore a tip. For example, if your employer decided to claim that your end-of-the-year cash bonus was just a gift, and not wages of any sort, you and the employer are both going to lose and still will owe income and payroll taxes on the amount.

    Now, if you’d waited until the waitress got off-duty and left the restaurant, and then you handed her money, you could probably defend it is a gift and not a tip. Giving it to her in the restaurant commensurate and contemporaneous with your bill…the IRS will say basically “if it looks like a duck and quacks like a duck, it was a duck”.

  24. Someone please make business cards with that on the front, and LP info on the back. I would leave one with every tip.

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