Small housekeeping note: in order to make things more legible, we’ve decided to break up the newsletter into the following sections: Featured Articles, Thought of the Day, News of the Day, Chart of the Day, and Meme of the Day. (And, of course, on Friday, Friday Essays.) What do you think? As always, let us know.

Featured Articles: #PlatformPitches

Introducing #PlatformPitches: Our Suggestions for the Republican Ticket

#PlatformPitches: Time For A New COPS Program

Thought of the Day: More On ‘No Tax on Tips’

Note: we have nothing to say about President Biden’s speech at the Chicago Convention (and this is why you read us).

EPPC’s Patrick T. Brown is one of the sharpest minds working on family policy in DC, and has been a day-one subscriber and supporter of PolicySphere (hi Patrick!). This is why you should follow him on X and subscribe to his weekly newsletter covering family policy.

Brown’s post last week focused on the infamous “No Taxes on Tips” proposal. The proposal is not at all popular among policy wonks in DC. We have (sort of) defended it in the past, so we think it’s interesting to revisit this issue.

Brown has several beefs with “No Taxes on Tips”: the potential for fraud, the fact that many service workers don’t pay income tax to begin with, and the idea that policies targeted at specific groups take away political capital and fiscal space from more broad-based policies.

The first criticism is the one we’ve seen the most on X (Brown spends comparatively little on it) and the one that has baffled us the most. It’s like those TikTok videos of the guy who bought a Ferrari because he deducted it as a business expense. That guy is going to prison. No, investment bankers will not be requalifying their bonuses as tips and deducting them from their income tax. Talk to any tax lawyer: if you can come up with some tax loophole in less than a minute, that’s ipso facto evidence that the Taxman has already thought about it and it’s already very very illegal. “If we lower the tax rate on corporations, what’s to stop individual Americans form incorporating as a business and paying the lower rate?” What’s to stop them is that if they do so the IRS will grab them and put them in prison.

The second one is the best criticism: the ostensible goal of the policy is to help service workers, but most of them don’t pay income tax to begin with! This is a totally fair point. Brown writes that half of servers don’t pay income tax. Honestly, that’s less than we thought! That suggests that half of them do. That’s still a lot of people helped.

The final point is the most important one. “For the same 10-year cost as “No Tax on Tips,” Congress could write a $4,000 check to every married couple (and $2,000 for single parents) welcoming a new child for the next ten years — and still have money left over,” Brown writes. That seemed implausible to us, but we checked the math, and it’s true. That’s a very good point. We would indeed prefer that policy to No Taxes on Tips.

The reason why we originally defended the policy (and still do, on balance) is because it reflects a welcome, or at least interesting, shift of policy from theory to helping specific, ordinary people with specific, ordinary problems. Tips used to be paid in cash, which means that in practice servers didn’t report them. Now they are paid digitally, which means they have to pay more tax (if they pay tax).

Brown quotes “Howard Gleckman of the Tax Policy Center” as raising “a basic question of fairness”: “Why should a service worker avoid tax on tips while a warehouse employee earning exactly the same income must pay tax on wages?” But why should a service worker have to pay tax now when they weren’t paying before, due to technological changes beyond their control?

There’s another element at work here: your correspondent writes this while recovering from surgery in France. France is in many ways paradise on Earth, but one way in which it very much is not is service workers. This is because service workers have high minimum wages and benefits guaranteed by law. Meanwhile, service in the US is one of the great institutions of that country, making it a delight to interact with most service-based businesses, in a way which is distinctively American and uniquely pleasant.

Tipping culture in the US is under assault from progressive Procrusteanism. Tipping culture is, of course, fundamentally inegalitarian: between servers, and between server and patron. It’s fundamentally aristocratic: the entire thing is based on noblesse oblige. It’s a mark of a high-trust society, one where one does not need formal laws to “know” that one is “supposed to” tip a certain amount even for mediocre service. It is a little gem of American culture, a beautiful Chesterton’s fence right in the middle of American life.

Support No Taxes or Tips or don’t support it. Our goal here, and in general at PolicySphere, is not to advocate for or against a particular view, but to help have better debate around those views. No Taxes on Tips may or may not be bad policy, but we like the philosophy and the intent behind it, and we want to defend it because it goes so diametrically against the instincts of so many of our fellow policy nerds.

News of the Day

#Energy – In his career as a Senator, JD Vance enjoyed taking aim at WSJ conservatives. So it’s interesting to see him in that newspaper’s pages with a clever pitch to its readers: Kamala is anti-energy, he writes.

#FamilyPolicy – Speaking of the, er, complicated relationship between JD Vance and the WSJ op-ed page, here’s that same WSJ denouncing his child tax credit proposal as a brake on growth.

#LGBT – Is the trans stuff just culture war noise, or does it really matter to real people? Here’s one example from IWF’s invaluable Inez Stepman about new EEOC guidance replacing sex with gender: “For example, a woman who works in a chemical factory that requires showers after work for safety now must share that shower with a male.”

#LGBT – Speaking of another concrete impact: mutilations of children. Chris Rufo tells us that “Texas Children’s Hospital has fired Vanessa Sivadge, the nurse who exposed alleged Medicaid fraud at the hospital’s child sex-change program. TCH denied Sivadge’s request to transfer, then terminated her employment after she blew the whistle.” These people really sound lovely.

#LGBT – Speaking of: the invaluable Leor Sapir has an update on the expert witness at a lawsuit of Dr Meredithe McNamara, “arguably the leading physician advocating for on-demand availability of medical “gender transition” for youth in the United States.” Gotta hear both sides.

#Immigration – The first day of the DNC was shockingly light on policy. Democrats love, really love abortion. Ok. But there was one bit of striking policy news: Kamala Harris endorsed the Biden Administration-proposed US Citizenship Act. This may be the most reckless amnesty proposal currently on the table. Its centerpiece is an eight-year path to citizenship for most illegal aliens present in the US as of January 1, 2021, for whatever reason. The bill would immediately grant temporary legal status to eligible aliens, with the ability to apply for green cards after five years if certain requirements are met. After holding a green card for three years (!), they could apply for citizenship. The act also aims to clear visa backlogs (read: shovel more people in), increase per-country visa caps, and expand worker visas. Its “border security” provisions are barely a fig leaf. This is a truly extreme proposal from the nominee of a major political party.

#Immigration – Speaking of: CBP has just admitted in a press release that entries of illegal aliens through ports of entry aren’t factored in Border Patrol statistics. That’s nearly 1 million illegal aliens the Biden Administration quietly smuggled into the US using a fast-pass entry phone app. These aliens “get work permits, SSNs and path to citizenship.”

#TheEconomyStupid – The NFIB’s new Problems & Priorities Survey is out. We like the NFIB’s data. First published in 1982, this report is issued every four years by the NFIB Research Center. The 2024 report is based on a nationwide survey of small business owners. The headlines: “Unchanged since 1986 (!!!), the “Cost of Health Insurance” remains the number one chronic issue for small business owners.” Costs are some of the biggest worries of small businesses. Also, “Increasing in importance from 2020, “Interest Rates,” topped the list by rising 43 positions from a rank of 56th in 2020 to 13th in 2024.” Finally, on the tax front: “The most severely ranked tax problem is “Federal Taxes on Business Income.” It ranks 4th, down one position from 2020. The Tax Cuts and Jobs Act benefited most small businesses but many still find their federal tax burden a critical problem. A quarter of small business owners think it is a critical problem, 5 points higher than four years ago. If Congress lets the Small Business Deduction expire at the end of 2025, it will result in a massive tax hike on small businesses and will likely exacerbate the federal tax issue.”

#BirthDearth – At the Institute for Family Studies, Aaron Renn covers the continuing epidemic of childlessness in America’s large cities.

#AmericanManufacturing – Boeing Finds Cracks in Structure of 777X Test Jets

#Media – Smart people no longer trust corporate media. This fundamental insight is why we started PolicySphere. One example which is not exactly surprising but still telling from the Media Research Center’s analysis: “Not only has Harris received 66% more airtime than former President Donald Trump, but the spin of Harris’s coverage has been more positive (84%) than any other major party nominee, even as Trump’s coverage has been nearly entirely hostile (89% negative).” There’s “bias” and then there’s whatever this is.

Chart of the Day

From the great quantifier of American religious trends Ryan Burge: In 2008, among people who attended religious services at least once a week: 42% had a high school diploma or less and 28% had a 4 year college degree. In 2022, among weekly attenders: 32% had a high school diploma or less, and 41% had a 4 year college degree. American working class life is becoming de-institutionalized, with the losses in social capital that go along with it.

Meme of the Day