(NEXSTAR) – Both presidential candidates promised to eliminate taxes on restaurant workers’ tips, a move that, if enacted, could be especially beneficial to employees in certain states.
“When I get to office we are going to not charge taxes on tips, people making tips,” Trump told culinary union workers at a June rally in Las Vegas. Harris would go on to make the same promise in August.
A recent analysis by the payment platform Square found that the share of a restaurant worker’s income made up by tips varies widely by state.
Wyoming has the highest reliance on tips, at 33%. Square payment terminal data shows that the average tip on restaurant checks in the Cowboy State is 16.11% as of Sept. 2024, down .48% from the year before.
Alaska and South Dakota are tied for second with restaurant workers’ tips making up 31% of income. The average Alaskan restaurant worker makes substantially more per hour, however: $16.87 compared to $13.49 in South Dakota, where the cost of living is lower. Like in Wyoming, tipping percentages fell from 2023’s numbers, slipping 0.13% to 15.66% in Alaska and 0.16% to 16.56% in South Dakota.
As for the places where tips make up the smallest percentage of income, one might think West Coast states with high minimum wages like California would rank first. However, Square found four states with average hourly wages nowhere close to those of the Golden State were tied for the top spot, at 18%: Nebraska with an average wage of $14.64, Oklahoma ($11.51), Arkansas ($12.89) and Mississippi ($10.66). Tipping percentages only grew in Oklahoma over the last year, with diners giving an additional 0.27% on average, Square found.
When calculated across the country, the average worker earns almost 23% of their income in tips, versus 22% in 2023, according to Square.
The pandemic and ‘tipping fatigue’
Tipping practices in the U.S. reached controversial levels during the pandemic, in part thanks to the same screens with pre-set, suggested amounts that often start above 15%.
“We are subjected to that app, that screen, almost every day when we buy a coffee or a sandwich,” etiquette expert Diane Gottsman, the founder of the Protocol School of Texas, previously told Nexstar. “So we have to get used to this form of payment… People think it’s manipulative, they resent it, and their perceptions of service go down.”
The ease of bumping up a tip, the desire to help service workers as the coronavirus upended the industry, and what some felt was an unspoken pressure to do so, saw the average gratuity at quick-service restaurants soar to 22% by April 2020.
As the pandemic wore on and inflation continued to rise – pushing up the cost of eating out – consumers became fed up and the average tip amount started to fall.
By April 2021, the average tip at quick-service restaurants had fallen to 18.6%, Square found. The average overall tip amount at U.S. restaurants in 2024 is 15.4% – down 0.1% from the previous year.
Meantime, inflation has cooled overall, but not so much for restaurants.
“Despite inflation easing, restaurants are continuing to face a number of challenges in their operations whether it’s fluctuating food prices, employee retention, or ballooning payroll costs,” Ming-Thai Huh, head of food and beverage at Square, said in the report. “Many restaurants are grappling with how to balance these increased expenses while still offering affordability to customers.”
