Need some help responding to a friend about abolishing taxes on tips.

[zclark2103]

I recently posted an article about Ron Paul wanting to abolish taxes on tips. I had a friend reply to it with...wouldn't that put us even further in debt, and that would hurt the individuals social security. I haven't yet responded back to her. I want to make sure I say the right thing. She is a waitress and a big govt person. I just want to make sure I have some facts to back up why it is a good idea to eliminate the tax on tips. Any input would be greatly appreciated. Thank you!

[sailingaway]

Isn't keeping any of our own money putting us further into debt? Tips are a gift, and gifts generally aren't taxed unless they are over $10,000 from a single person. The fact is if you raised taxes you still wouldn't be able to balance the budget, and Ron's plan balances it in 3 years while still preserving social security, medicare, welfare programs (with block grants of the money to states to tailor their own plans) veterans benefits, and, until a better system can be devised, student loans.

Romney's, for example, cuts only a PART of FUTURE INCREASES and even so cuts medicare. And he doesn't balance the budget. But he does still tax tips.

Which plan is better?

Now, there is a separate point on social security. First, Ron's plan stabalizes it forever if he gets everything he wants, whereas others still leave it running towards bankruptcy with no one getting anything, and meanwhile the 'cost of living increases' calculated without considering the costs of food and other things that go up faster, in real terms means payments are shrinking already. By balancing the budget, Ron stops the driver for this inflation, as well.

BUT, yes, if you pay more into social security taxes UP TO A POINT, and if you aren't vested already, it CAN impact your social security payments out, and they need to look at their own circumstances. But if Ron's entire plan were adopted, with him as president, the whole system would be better off.

And by the way - welcome to the forums!

[zclark2103]

Great points. I actually never even thought of the tips in that way...as a gift. It makes perfect sense though. Yea I did respond to her more in the way of.. Ron Paul's balanced budget plan, and him keeping social security but giving the option of an opt out. Thank you for the response.

[CaptUSA]

Welcome to the forums! So nice to keep seeing new posters!

Your friend seems to think that the government already owns her money and should decide how much of it she keeps. That's dangerous thinking. Tips are a gratuity - not a wage. She is paid a wage and as long as we have a income tax, that is what should be taxed. But when a person gives her money simply out of appreciation for her work, that is not the same thing. Her employer is not paying her that money. If it helps, you can tell her that the person who gave her that gift, already paid taxes on that money.

[CaptUSA]

Oh, and to her larger point about depriving the government of money increases the debt...

Tell her that the only way the government can get money is to take it out of the economy. The reason the economy is struggling is because too much "wealth" is being taken out of it - through taxation and currency devaluation. We have a spending problem, not a revenue problem. If we can get spending down and balance a budget on that end, we won't have to take as much from the economy and she will get an easier job than waitressing and will be paid more money (all of which will be taxed.) :) Hope this helps.

[zclark2103]

Awesome! Thank you for your help. This will definitely help me make my point. I wanted to go at it lightly so I could possibly win her over to Ron Paul.