[Congressional Record (Bound Edition), Volume 145 (1999), Part 4]
[EXTENSI]
[Page 6094]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 6094]]


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

                                 ______
                                 

                           HON. DUNCAN HUNTER

                             of california

                    in the house of representatives

                        Thursday, March 25, 1999

  Mr. HUNTER. Mr. Speaker, today I rise to introduce 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 of 
thousands of small businesses.
  My bill is very simple. It calls a tip what it is: a gift. All tips 
earned, 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 
for 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 percent of those in the service sector who work for 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 for 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 has some understanding of life for so many, 
especially during their younger years in entry level jobs. 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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