[Congressional Record Volume 147, Number 43 (Wednesday, March 28, 2001)]
[Extensions of Remarks]
[Page E472]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    INTRODUCTION OF A BILL TO ELIMINATE TAXES ON TIPS UP TO $10,000

                                 ______
                                 

                           HON. DUNCAN HUNTER

                             of california

                    in the house of representatives

                       Wednesday, March 28, 2001

  Mr. HUNTER. Mr. Speaker, today I am introducing a bill that will 
benefit millions of Americans directly, substantially and quickly, 
including most notably single mothers and students. Furthermore, this 
legislation will lift some of the heavy burden of government off 
thousands of small businesses.
  My bill is very simple. It calls a tip what it is: a gift. All tips 
given, not to exceed $10,000 annually, would be tax free. This puts 
hundreds of dollars a month back where it belongs, with the individual 
who earned it.
  Those who work in the service sector, who rely principally on tips to 
supplement their income, work in a system transacted largely in cash. 
Accounting for small amounts of cash for income tax purposes is not 
only unworkable, it is unenforceable, even if a paperwork scheme could 
somehow be conceived. Small amounts of cash, received through hundreds 
and hundreds of transactions, and almost never while standing behind a 
cash register, should not be taxable. Washington bureaucrats lack an 
understanding as to just how impractical the present system is to all 
those who labor so hard for their tips. The system simply breaks down.
  Tips cannot possibly be reported accurately, and law-abiding citizens 
who work for tips do not wish to be labeled cheaters by people who 
don't understand the realities of their work. It is time to change 
that. My bill caps the tax-free earnings of those who make waiting on 
tables a career in high-end restaurants and resorts, at $10,000. But 
for the 95% of those in the service sector who receive tips, it's time 
to change the tax law covering income from tips.
  Under current law, service employees who typically earn tips are 
assumed to have made at least 8 percent of their gross sales in tips. 
This tax is applied regardless of the actual level of the tip. Further, 
if the service personnel earns more than 8 percent in tips they are 
expected to report them accordingly. The end result for these 
employees, many of whose base salaries do not exceed minimum wage, is 
that they may have to pay taxes on income they didn't receive.
  In addition, accounting for tips and gross sales is a burden on every 
restaurant, bar or other small business whose employees are regularly 
tipped. They are constantly under threat of an audit, where the IRS 
will hold their business responsible if the agency determines tip 
skimming to have occurred.
  By putting in place a reasonable annual cap and strictly defining a 
tip, this tax relief bill is clearly focused on low- to middle-income 
households. According to the industries involved, most of the employees 
that will be helped are either students or single mothers. In addition, 
most of the employees are at the beginning of their careers.
  Those in the service sector who rely on tips to supplement their 
income are a special breed of people. Those who work for tips see a 
direct relationship between effort and reward like few others. Night 
after night, day after day, weekend after weekend, the millions of bell 
hops, valet parking attendants, coat checkers, taxi drivers, 
hairdressers, bartenders, waiters and waitresses are on the job, 
working hard and providing vital services to people of every walk of 
life.
  Let us give a break to those who labor so hard for their living. 
Let's show them for a change that the Federal Government is not so out 
of touch and understands the special needs of those at the beginning of 
their career. The time has come for government to get out of the way of 
our Nation's most prolific entrepreneurs, service personnel and their 
employers. I hope other Members will join with me in this common sense 
proposal that will help millions of hard working Americans.

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