Column, 578 words

Waiter, Am I Subsidizing Your Pay?

The rest of us need to stop picking up the restaurant industry's tab.

Marjorie_Elizabeth_Wood

Late April doesn’t just bring flocks of tourists to Washington. It’s when hundreds of members of the National Restaurant Association — a.k.a. the “other NRA” — swarm Capitol Hill for two intensive days of lobbying.

With a $65 million budget and over 52,000 members, the other NRA ranks among the nation’s most powerful corporate lobbies. In 2014, its top priorities include fighting pro-worker measures like paid sick days and new health care requirements the Affordable Care Act mandates for employees.

When Congress Serves the Other NRA, an OtherWords cartoon by Khalil Bendib

When Congress Serves the Other NRA, an OtherWords cartoon by Khalil Bendib

Challenging efforts to raise the minimum wage is the other NRA’s top priority right now. Legislative observers expect Congress to vote on a bill to raise the federal minimum from $7.25 to $10.10 per hour this spring.

The bill also includes a raise in the minimum wage for restaurant servers and other tipped workers, which has been stuck at $2.13 per hour for over 20 years. To date, the other NRA has spent more lobbying dollars opposing a minimum-wage boost than any other single industry group.

During their lobbying spree, members of the other NRA will no doubt profusely thank members of Congress who have helped maintain the status quo.

While they’re at it, there’s another group of people they should be generously thanking: American taxpayers.

Why? Taxpayers are subsidizing both the low wages of restaurant workers and the excessively high compensation of restaurant CEOs, according to a new report that I co-authored with Sarah Anderson, my Institute for Policy Studies colleague.

Like most low-wage employers, the restaurant industry pays its workers so little that many of them rely on Medicaid and other taxpayer-funded anti-poverty programs. For instance, more than 50 percent of fast food workers depend on some form of public assistance.

This arrangement costs taxpayers almost $7 billion a year.

At the same time, taxpayers subsidize sky-high executive compensation through a trick known as the “performance pay” loophole. This tax break lets large corporations deduct unlimited amounts of money from their income taxes for the cost of stock options and other forms of “performance-based” executive pay.

Though Congress capped the tax deductibility of compensation at $1 million in 1993, this loophole creates an incentive for companies to pay their CEOs extravagantly.

That’s because the more a company pays its CEO in “performance pay,” the less the company pays in taxes.

And when corporations lower their tax bills by activating this loophole, somebody else gets stuck with the tab and has to make up for the loss. It can be done by cutting spending or raising taxes. Or both.

In our report, we found that during the past two years, the CEOs of the 20 largest NRA members pocketed more than $662 million in fully deductible “performance pay,” lowering their companies’ IRS bills by an estimated $232 million.

While the other NRA’s members are busy thanking Congress for its hospitality, perhaps they should also sit down and write some thank you notes to the American taxpayers.

To make sure Congress also hears the voices of regular people during this lobbying spree, Restaurant Opportunities Centers United, the National Domestic Workers Alliance, and National People’s Action will hold a demonstration on April 28. They’ll protest the other NRA’s greed, worker exploitation, and undue influence.

Even if you’ve never waited tables or poured drinks for a living, chances are you pay taxes. I hope you agree that it’s high time Congress told the other NRA to pick up its own tab.

OtherWords columnist Marjorie Elizabeth Wood is an economic policy associate at the Institute for Policy Studies, the Managing Editor of Inequality.org, and the co-author of the new IPS report Restaurant Industry Pay: Taxpayers’ Double Burden Taxpayers’ Double Burden. IPS-dc.org
Distributed via OtherWords.org

  • Terry

    The sad part is that your waiter, particularly in a fancy restaurant, is making a living wage, while back of the house help is getting the shaft–sometimes making well below minimum wage. Some ethnic restaurants hire Mexicans/Latinos that work 70 hours for $400 per week–like $5.91/hour, if you don’t factor in overtime pay for the last 30 hours, which would drop their real pay to under $5.

  • Jerome Bigge

    It would be simple enough for the government to determine how much of the social assistance necessary is caused by low wages and institute some sort of “fee” that would be added to the taxes that these businesses pay. Thus eliminating their “free ride” on the taxpayers who are effectively having to make up the difference between what the industry is paying its help and the welfare cost created by the low pay.

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  • Shaddow Sean Reupert

    The real problem is that Restaurants will have to raise there prices to accomdate the raise in wages. Small restaurants would shut down completely leaving only jobs to corporate reaturants. Prices reflecting the increase will mean $16+ burgers and 50+ steaks, just look at the prices in Vegas. Any intelligent servers would hate this due to the decrease in tips and the great jobs servers have making $100+ a night will now be at most $50, The attitude “You just got a 500% raise, why should I tip you?” will be most of the servers problems.The average low end annual salary with tips will go from $30,000 to $21,000. The better the restaurant the more you will lose.

  • Shaddow Sean Reupert

    Most servers are not on welfare in fact most servers and bartenders make too much money to get government assistance, unless they are not claiming their tips and screwing the average taxpayer that pays their taxes.

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