Arizona Restaurants Want to Cut Their Servers’ Wages

Today on TAP: As both presidential candidates endorse eliminating taxes on tips, in Arizona businesses look to reduce the subminimum wage for those same tipped workers.

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The Harris-Walz campaign has announced a Friday speech in Raleigh, North Carolina, which will be “focused on her plan to lower costs for middle-class families and take on corporate price-gouging.” Today’s inflation numbers, which dipped below 3 percent year over year for the first time since 2021, suggest one version of this is “keep doing what we’re doing.”

But the speech is notable as part of the slow rollout of Harris’s economic-policy agenda, moving away from broad platitudes and toward actual details. She’s brought in Biden administration veterans Brian Deese and Bharat Ramamurti to help advise her; they were instrumental in the Biden transition to a more aggressive posture toward corporate power (including … taking on corporate price-gouging), and the hires of Lina Khan, Jonathan Kanter, and their allies.

So far, the biggest domestic-policy move of the campaign was Harris co-opting Donald Trump’s idea to eliminate taxes on tips. She introduced this at a rally last week in Las Vegas I attended, at the request of the Culinary Union. I’ve given my thoughts on this: It’s not very good policy that will not give much of a benefit to those who really need it (tipped workers who don’t owe any federal taxes) while supercharging tip culture to those who really don’t.

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The better way to help tipped workers is to raise their standard wages. The subminimum wage in America is as low as $2.13 an hour in many states. Businesses like that because they don’t have to pay much in wages or payroll taxes, offloading the need to give workers a decent living to the whims of customers. Solving take-home pay issues by cutting taxes on tips for (some) workers, rather than raising pay standards for businesses that employ them, serves the interests of corporate trade groups.

And we know this, because in one swing state, Republicans and those same corporate trade groups, all of which backed the “no taxes on tips” idea when it was solely Trump’s, are fighting to cut service worker pay at the ballot box.

Proposition 138 on the Arizona ballot this fall will change the state constitution to allow business owners to cut the pay of workers who earn tips to 25 percent below the state minimum wage. Currently, those businesses can pay workers up to $3 an hour less. This amounts to a 5 percent wage cut in the immediate term, and more over time.

There were going to be competing ballot measures on this, one that would eliminate the subminimum wage for tipped workers in Arizona and one that would cut that subminimum wage. But under pressure from a lawsuit by the Arizona Restaurant Association, the Raise the Wage campaign withdrew their signatures last week. So voters will only get to weigh in on whether the tipped minimum wage should be lower.

Republican lawmakers put this proposal on the ballot, with backing from … those same folks at the Arizona Restaurant Association. The National Restaurant Association and national Republicans all endorsed Trump’s “no taxes on tips” idea. This Arizona measure reveals the true aims of the Trump concept: talk up a populist-sounding idea while letting businesses cut wages further in the background.

This explains my hesitancy with Harris co-opting the Trump plan, when a policy that would actually help tipped workers who need it is out there. Harris could begin to clean this up by opposing Prop 138 in Arizona, and running on increasing the subminimum wage.

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