Thursday, March 24, 2011

A good tip

It's that time of the year again. I've done my taxes and sent in the returns. Can't wait until I get my state refund back; that check for $18 hopefully won't damage Governor Cuomo's efforts to get the New York State budget back in order.

Sometimes I sit back and marvel at the whole system of collecting (or, in some cases, not collecting) tax revenues in this country. For starters, the classic 1040 form has all sorts of trap doors and loopholes.

Or, put another way, have you tried to figure out your capital gains income without the use of a computer lately?

With that on my mind, I recently finished reading Bill James' new book, "Solid Fool's Gold." (Review here.) When I was sailing along, reading about pitching rotations and the Hall of Fame, James snuck in a short essay about, of all things, tipping. And how ridiculous it has become.

It's become ever-present, if you haven't noticed. James points out that the number of services that expect/seek tips has grown quite a bit over the years, and so has the percentage that we're expected to pay out. And if we don't pay out something, we're cheapskates.

I always get a laugh out of the December newspaper articles that list the people who should get a holiday tip every year. The list gets longer and longer, and includes people like the mailman who probably earns more than I do. That's in addition to the dollar here and dollar there that come out of the wallet. For example, it's rather common to leave a tip for the cleaning staff of a hotel now, even though you'd think a clean room ought to be expected when you check in.

I'm not saying that many of these people don't deserve some sort of "thank you" for good service. But it's pretty interesting that the government more or less looks the other way for many of these payments, meaning the "underground economy" continues to grow with the practice.

In addition, it's always interesting to see what businesses come up with the tag line, "please pay in cash," when they quote a price. I'm not here to out anyone in this sense, but frequently it comes in an area where I'm just happy to find someone to get someone who can do the job for me. Therefore, I'm in no position to argue.

How odd is it, then, when you frequent the business of a one-person independent contractor (use your imagination), and pay that person for a service -- and then give an extra couple of bucks for a tip? It all goes in the same cash register. I have no idea how it is reported to the government, and it's really none of my business. As James points out, it adds up pretty quickly.

Even odder, sometimes the government even encourages such tax evasion. I'm not sure how the laws work from state to state, but some places allow restaurants to pay the wait staff less than minimum wage with tips making up the difference. Yes, I guess that those tips are supposed to be reported to the IRS, but there's not exactly a strong monitoring system in place.

James argues that tipping will eventually stop, because the trend can't continue to grow forever. I'm not sure if that's going to happen to all involved in that trend. But in an increasingly cash-less society, and in times when governments are looking harder and harder for revenue sources, you wonder if a bit of a reckoning for the practice is coming.

You never know what's going to be in a baseball book -- particularly when Bill James is writing it.

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