Latest news with #taxbreak
Bloomberg
28 minutes ago
- Business
- Bloomberg
UK House Prices Post Surprise Increase in May, Nationwide Says
UK house prices unexpectedly rose in May, in a sign that demand for housing remains resilient following the expiry of a tax break for buyers, according to one of Britain's largest mortgage lenders.
Telegraph
3 days ago
- Business
- Telegraph
Trump is about to send tipping culture into overdrive
'When I get to office we are not going to charge taxes on tips, on people making tips,' Donald Trump promised on the campaign trail. 'If you're a restaurant worker, a server, a valet, a bell hop, a bartender, one of my caddies –your tips will be 100pc yours.' The billionaire president has stayed true to his promise. The bulk of the tax cuts outlined in Trump's 'big, beautiful' tax and spending bill, currently before the Senate, reward the wealthy. But one populist clause within the legislation is a plan to scrap federal tax on tips – one of Trump's key campaign pledges. The tax break is popular with US service workers – everyone from hairdressers to restaurant staff – but may not be so popular with customers. American tipping culture is already in overdrive, and people hate it. A policy that was once the sole domain of the restaurant and hospitality sector has rapidly proliferated since the pandemic. Takeaway coffee orders now prompt demands for a few bucks extra and even stopping by a news-stand for a paper or some gum can lead people to pay an extra 20pc on their bills. Many Americans have noticed this creep and don't like it. As one Reddit user put it online: 'What the f--- am I tipping for? Is it not bad enough that I just paid over $5 (£3.7) for a small bottle of water?' Trump's tax break is likely to push a wave of new jobs to adopt restaurant-style tipping policies and will incentivise businesses to restructure their employees' pay, so that they receive a larger proportion of their income from tips. Maurice Obstfeld, former chief economist at the International Monetary Fund, says: 'Number one, this is going to induce new employers to classify more compensation as tips.' It may already be happening. Chris Bakke, a San Francisco entrepreneur and investor, wrote on X recently: The message, which may have been a joke, was in response to news that the US Senate had passed the No Tax on Tips act – a bipartisan bill proposing a tax deduction of up to $25,000 for cash tips. It is separate to the president's proposals, showing the broad support for the policy across the political spectrum. My barber just offered me a $1 haircut if I tipped him $50. — Chris Bakke (@ChrisJBakke) May 20, 2025 $15bn bill Both Republicans and Democrats present the policy as a boost for blue-collar workers. However, economists warn that people could end up with lower baseline pay as a result of the changes, putting more pressure on customers to top up earnings. That means even more social pressure and financial pain at the checkout. The plans laid out in Trump's tax and spending bill offer the same level of tax break as the No Tax on Tips act. Under the current law, staff are required to report tips to their employer if they total $20 or more in a single month. Businesses then include the tips in salary calculations – withholding federal income tax, social security tax and Medicare taxes. The new exemption will only apply to tips paid in cash, not by card. Workers must earn less than $160,000 per year to qualify and be working in occupations that 'customarily' receive tips. The US Treasury will publish a list of these occupations when the bill is passed into law. The total cost to the public purse will be around $15bn per year. The impact on American consumers and tourists visiting the US will also be huge. Abir Mandal, senior policy analyst at the Tax Foundation, says tax exemptions on tips will create 'perverse incentives' for employers. It will encourage businesses to make employees source more of their wages from tips, with a lower proportion from their salaries. Expectations for tips could also become far more widespread, and bigger. Chris Edwards, a tax expert at the Cato Institute, a libertarian think tank, says: 'I think different job types will shift their types of compensation. You can think of all kinds of professions where it could become more normal.' Luggage handlers at airports are an obvious potential example, says Mandal. 'They are given a salary. You can give them like $1 or $2 for carrying a bag, but in general they are paid a wage. If this thing takes off, perhaps their income could be reconfigured so that they would make a lower wage but expect a larger tip per bag.' Covid tipping point Tipping has always been the norm in US restaurants, but something changed during the pandemic. More people had food deliveries and wanted to show their appreciation for drivers, widening the tipping net. At the same time, wage growth accelerated sharply as the economy reopened but restaurant bosses and other small business owners struggled to match it. As a result, demands for tips grew. 'The expectation of tipping has grown quite dramatically,' says Stephen Barth, an attorney and hospitality law professor at the University of Houston. 'It was already growing and then during Covid it expanded exponentially.' The share of bakeries asking for tips has soared from 36pc to 49pc in the five years to July 2024, for example, according to analysis of payroll data by Gusto. Among coffee shops, the proportion has jumped from 56pc to 72pc. 'For a lot of small businesses, they run on very tight margins, which means that owners couldn't always raise wages. Tips let them pay more to their employees without hitting their budgets,' says Nich Tremper, senior economist at Gusto. The growth of electronic payment terminals, such as Square, has also made it easier to request tips. Whereas with cash it was up to a customer's discretion, now they are confronted with a menu of tip options and have to actively opt out. Even some card machines now have this as the default option. Tips are even now entering shops. The share of retail businesses using tips as part of their employees' pay nearly doubled in the five years to July 2024, rising from 3.86pc to 6.6pc. One in six health stores, 16.2pc, now pay their staff partly in tips. If Trump's bill passes, tipping will become even more important to staff wages, but potentially also more irritating to give. 'Only cash tips will be untaxed if this legislation passes. There may be added pressure on consumers to pay tips in cash. It'll make things awkward. And people already hate tips in America,' says Mandal. The change to federal tax policy is likely to trigger a wave of similar policies at a state level, he adds. States typically try to conform their own taxable income in line with federal policy. That may sound good for workers. But Barth says it amounts to just a 'subsidy for employers'. The tax break will reduce pressure on employers to raise wages and companies could actually cut workers' base pay as a result, demanding they make up the difference through tips. It hits at the heart of what many customers dislike about the recent transformation in tips. What was once a way of showing appreciation for good services has transformed into an expectation with no real link to the quality of experience. If you don't tip, it's not a sign that you're unhappy with the service – it's a signal you're a bad person. Obstfeld is scathing: 'This was a campaign promise that was made to essentially pander to voters and the economic rationale for it is basically nil.' The public may soon share his anger as demands for tips mount up.
Skift
23-05-2025
- Business
- Skift
Tax-Free Tips? Hotels Hope Proposed Bill Will Help Fill Jobs
Hotel companies are betting that a potential federal tax break on tips could be a helpful recruitment tool to fill thousands of open positions and keep experienced workers from leaving the industry. The U.S. Senate and House passed legislation this week that would affect the take-home pay of tipped workers, including hundreds of thousands of hotel employees who provide housekeeping, food and beverage, bellhop, and concierge services. The topics of tips and taxes and are politically sensitive. Many of the hotel companies we reached out to didn't want to speak about it. But here's what the industry's hope is: Tax-free tips might make the country's 2.17 million hotel jobs more appealing. "This tax exemption is huge," said David Kong, the former CEO of BWH Group (Best Western). "I hope it will hel
The Sun
23-05-2025
- Business
- The Sun
Fury as Angela Rayner demands half a million parents across UK are STRIPPED of child benefits
LABOUR's civil war deepened last night after it emerged Angela Rayner pushed to strip child benefit from hundreds of thousands of families. The Deputy Prime Minister urged the Treasury to 'claw back' payments from households where the highest earner makes between £50,000 and £80,000 — reversing a key Conservative tax break worth up to £1,300 a year. 2 2 The move would wipe out one of the most popular measures from Jeremy Hunt's 2024 Budget, which raised the threshold at which families start losing child benefit. Previously, households began to see their benefit cut if one parent earned over £50,000, with the payments completely withdrawn at £60,000. Mr Hunt raised those limits to £60,000 and £80,000 respectively — allowing nearly half a million families to keep more of their entitlement. But Rayner's proposal, revealed in a document dated March, would roll that back - hitting teachers, junior doctors, police officers and others who had just been promised relief from rising bills. The system has long sparked fury among parents, because eligibility is based on individual salary, not joint household income. How to claim Child Benefit Child benefit is worth up to £1,331 a year for your first or only child and up to £881 a year for additional children. This works out at £102.40 every four weeks or £25.60 a week for your first child and £67.80 every 4 weeks or £16.95 a week for their siblings. There is no limit on the number of children that can be claimed for. Applying is straightforward and can be done in minutes at or through the HMRC app. Parents with a newborn baby should make a claim online as soon as possible and could then receive their first payment in as little as three days. You can also backdate claims for up to three months. Parents can make a claim and then choose to opt out of receiving Child Benefit payments can still receive National Insurance credits if one parent is not working. National Insurance credits build up your entitlement to the state pension. That means a single earner on £60,000 with a stay-at-home partner loses the benefit — while a couple each earning £49,000 still qualify in full. Mr Hunt had also launched a review into fixing this anomaly by assessing total household earnings instead — but Labour has since quietly dropped that plan. The ex-Tory Chancellor said: 'This may look like a relatively minor budget measure but was one of the most popular things we did because it helped striving middle-class families struggling with childcare costs. 'Abandoning them would finally confirm that far from being a New Labour government, this is a traditional anti-aspiration Old Labour government.' The leaked memo, published by The Telegraph, revealed Ms Rayner also suggested broader tax hikes and benefit cuts in a bold bid to fill Treasury coffers. It marks a direct challenge to Rachel Reeves, who is already reeling from a bruising U-turn on plans to axe the winter fuel allowance for wealthier pensioners. And it is fuelling talk of a Cabinet rift between Labour's Left and more cautious centrists. Allies of Reeves were quick to stress last night that she alone sets tax and spend policy, and that the ideas in the memo are not government plans. But Left-wing MPs have seized on the document, urging Sir Keir Starmer to go even further — including scrapping the two-child benefit cap and hiking taxes on savings.
Washington Post
23-05-2025
- Business
- Washington Post
‘No tax on tips' could backfire amid growing tip fatigue
Let's talk about tipping — again. Because just when you thought navigating who gets what and how much was complicated enough, Congress is about to make it even messier. The Senate's unanimous endorsement of the 'No Tax on Tips Act' — exempting those earning less than $160,000 — could ignite a whole new level of tipping resentment. Will consumers feel like they're subsidizing a government tax break? And what about the workers — wait staff, bartenders, delivery drivers, hair stylists, manicurists — who depend on tips to make ends meet. Will they face more scrutiny, even judgment, of their work? If this tax break makes it into the final federal budget, it could create a costly ripple effect for both the people who leave gratuities and those who pocket them, potentially leaving both sides feeling shortchanged. Here's how I see this playing out. A Bankrate survey last year found that Americans have taken an increasingly negative view of tipping, with roughly 1 in 3 calling it 'out of control.' 'There are so many people we don't tip for providing services,' one reader wrote after my column last summer on whether tipping had gone too far. 'We tip a taxi driver but not an airline pilot? We tip at the counter of a cafe but not a fast food joint? We tip waiters but not nurses? Even in states where the minimum wage has been raised to $12, $15 or $17, we're still tipping. The whole thing is dumb and, frankly, should be outlawed. Pay people an appropriate wage for the job they do, the product they deliver or the service they provide. The consumer should not be involved in the decision of how much an employee takes home.' Suspending taxes on tips will inevitably fuel customer frustration with the practice. 'If we hated 'tipflation' before, imagine what it would be now!' a Facebook user wrote. Many merchants now use cashless payment devices that default to a tip selection ranging from 15 to 25 percent. If you want to leave less, you have to use a custom tip option with the worker staring at you while you do the math. This can be awkward and intimidating for a lot of folks. In the Bankrate survey, 34 percent of Americans said they are especially annoyed by pre-entered tip options on payment screens. This proposed tax incentive will 'expand the use of tipped work — a system rife with discrimination and worker abuse — potentially leading to consumers being asked to tip on virtually every purchase,' according to an Economic Policy Institute report. Tipping transfers some of the responsibility of providing a living wage from the employer to their customers. This has caused resentment among many consumers who liken tipping to subsidizing employers. Some experts say employers might be more inclined to keep base wages low if a significant portion of an employee's income comes in the form of untaxed tips. This could shift a larger share of a worker's compensation onto customers, and create financial instability should tipping habits change. This measure also could undermine efforts to raise the federal minimum wage, which has stood at $7.25 an hour since 2009, the Economic Policy Institute said. 'Not taxing tips could further undercut efforts to raise compensation for rideshare, delivery, and other gig/app-based workers who receive tips,' the nonprofit, nonpartisan think tank said in its report. Tip amounts are generally discretionary, which creates uncertainty for the customer and the service worker. Many consumers already are unsure about the appropriate amount to tip. With a new tax break, some my feel justified in tipping less, which could result in greater fluctuations in workers' earnings. There's a subreddit — r/EndTipping — for people who dislike or want to abolish tipping. It has 35,000 members, who often argue that tipping is an unfair and inconsistent way for workers to earn a living. They frequently call on businesses to pay their employees more instead of relying on customer tips. 'Now that it looks like the government in the US will effectively pass a 'no tax on tips', will this alter how much you tip in full service restaurants, etc?' one user posted recently. Here are some of the responses: Others suggested reducing the amount you tip to account for the tax-free income. Under the proposal, eligible employees would get a federal income tax deduction for cash tips up to $25,000 a year. However, it's important to note that many lower income families may not get a large financial boost from the tax break. 'About 4 percent of families report tips to the IRS, and those who do are disproportionately young, unmarried, and lower-income, according to an analysis of the proposal by the Budget Lab at Yale University. 'This means that many tipped workers do not pay income tax to begin with and would not benefit from a new deduction.' If implemented, the 'no tip on tax' proposal will amplify customer tipping fatigue, fuel frustration over wage subsidization, and further highlight a practice that is unpopular with many Americans.
