NRA fights payroll tip tax: seeks to return burden to workers

NRA fights payroll tip tax: seeks to return burden to workers – National Restaurant Association; includes related article

Charles Bernstein

NRA fights payroll tip tax

Seeks to return burden to workers

The National Restaurant Association board unanimously voted here last month to seek redress from the new Social Security tax on employee tips through legislation for a 100-percent tip credit on the minimum wage.

The proposal would ease the burden on food-service employers by shifting the liability for paying Social Security taxes back to the employees.

Immediately upon returning to staff headquarters in Washington, D.C., an NRA delegation, led by government relations director Richard Crawford, went to Capitol Hill in search of a congressional sponsor for such legislation.

The NRA board’s action at Marriott’s Desert Springs Resort here followed a government relations committee meeting in which members decided to press for the complete tip credit rather than seek repeal of the legislation. Debate centered on which approach would be more practical and likely to achieve results.

Earlier, NRA 1987-88 president Michael J. Grisanti lambasted the industry for apathy and called for an intensified grass-roots campaign “to finally win the crucial 1988 legislative battles.”

Grisanti warned of skyrocketing costs inherent in legislative measures that “could put a lot of restaurants out of business.”

The NRA’s legislative proposal is aimed at undermining a new tax levy contained in a compromise deficit-cutting measure that was signed into law in late December. It has been estimated that the new Social Security levy would raise $200 million this year, mainly from restaurant employers.

Based on the resolution adopted here, NRA efforts will center on amending the Fair Labor Standards Act to raise the current 40-percent allowable tip credit to 100 percent. The tip credit was reduced to 40 percent from 50 percent several years ago.

Under the new law, in effect since Jan. 1, employers must pay Social Security, or FICA, taxes on the full amount of employees’ gratuity income. Under earlier rules, employers were liable for only the amount of the minimum wage, now $3.35 per hour.

Under the NRA’s proposal, tip income would be completely excluded from an employer’s tax liability.

A tip credit is the allowance made in the wage laws in order to count tip income as part of the minimum wage. A 40-percent tip credit allows a restaurant employer to pay a minimum wage of $2.01 per hour and to assume that employees earn another $1.34 per hour in tips, to reach the $3.35 minimum.

“Passage of a 100-percent tip credit is essential now,” declared government affairs committee chairman Richard Marriott. “We cannot accept taxes on both wages and tips.”

NRA sources indicated there would be no compromise or fallback position from the push for a 100-percent tip credit.

Bringing the Reagan administration to task, the board’s measure declares that “whereas Congress during the past decade has introduced and passed legislation which treats tips as wages and, as a consequence, levies taxes on those wages payable by both employee and employer, be it resolved that the NRA seek the introduction of legislation to increase the tip credit to 100 percent.

“Further, that the association work on this effort with allied organizations to make our elected officials aware of other previous actions and the effect of such legislation on the food-service industry.”

Harris “Bud” Rusitzky, NRA treasurer, emphasized afterward that “the idea is to put Congress on notice that these things will not be tolerated in 1988, a major election year. We are fully prepared to tell senators and representatives that if they won’t support measures favorable to the industry, we’ll give our money, support, and votes to other candidates.”

“Let’s face it,” an NRA spokesman asserted. “The Reagan administration has been steadily eroding the viability of the food-service industry and taxing us to death.”

The industry has suffered legislative setbacks starting with the 1983 requirement that employers have to report tips totaling at least 8 percent of gross sales to the Internal Revenue Service or else break out the individual tips of each employee.

The 80-percent business meal tax deduction limitation was passed in late 1986, followed by an immigration bill making employers responsible for hiring “illegal aliens” and the recent New Year’s Eve “surprise” passage of the FICA tax on tips–a measure “hidden” in a deficit reduction bill.

On the other hand, a top NRA government relations source pointed out privately, “a victory or defeat is in the mind. Perhaps the industry should realize that the 80-percent rule instead of a possible 50-percent and the long delay in minimum-wage legislation with prospects for only moderate increases are in many ways a victory.”

COPYRIGHT 1988 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group