TAXES, RESTAURANT TIPS, and the filthy rich

Copy of 1040Two(Just finished a big project and will be back next week with new stories. In the meantime, here’s a repost …this issue keeps coming  up.)

We’re taking a break today from our usual bar stories.  Something has been bugging me lately with all the talk about who pays taxes, and how much they pay.

And while my gripe is strickly about restaurant tips and a broken tax system, I think the details might interest everyone.

All restaurant employees who make a living on tips — who make even one dollar from tips — pay federal income tax on what they receive.  My complaint is . . . why do they pay at a rate twice as high as the fat cats who make millions?

How harshly would you expect the US government to tax a restaurant tip as little as a quarter — as compared to someone’s $1,000,000 bonus?  The answer might surprise you.

First let’s look at what a tip actually is, and what it isn’t.

A tip is a gift under $13,000 . . . 

Have you ever seen a customer buy a round of drinks and then say to the bartender — “Get one for yourself.”   It happens all the time.  It’s gesture of appreciation.  It’s a gift.

Likewise when a customer leaves a tip (so the bartender can buy him/herself a drink later — or buy whatever they want), that’s also a gift.

It’s certainly not wages.  There’s no agreement guaranteeing how much will be given, . . .  in fact, the customer can decide not to leave any tip at all.  (What if a tip really was wages?  Would the customer be liable for state and federal employer taxes?)

Nope . . . a tip is a gift, pure and simple, and as a gift under $13,000 it’s not subject to gift tax.

But the government needs money, and I suppose they justify taxing tips because at the end of the day, at the end of the week and the year, we do have that money to spend.

So the government counts these gifts as income.

And they tax them at the same rate as wages.

Now to the fat cats . . .

Everyone knows the tax-system is set up differently for the super-rich, but lately it’s become clear how thoroughly the game is totally rigged.

Even after hiding money in exotic offshore tax shelters and taking advantage of every tax loophole — when declaring what remains the super-rich can still pay at a rate much lower than yours and mine.

Restaurant employees (like most working folks) pay at a tax rate of 25 -35%.  But many of the super-rich often pay as little as 15%, 10% . . . and sometimes pay nothing whatsoever.

How is this possible?

One advantage the super-rich have is the use of clever financial terms like “carried interest,” “capital gain,” and “deferred income.”  They use this high-sounding jargon to suggest that unlike other forms of “income” (such as tips) . . . THEIR income should hardly be taxed at all.

For example by using terms like “active losses” vs. “passive losses,” and “total return equity swap” — the super-rich can essentially choose their own tax rate.  According to Victor Fleischer (a tax expert and law professor at the University of Colorado), these folks save:

“ . . . substantial amounts of money by pretending that regular income received as a management fee for running a private equity firm is not income, but is instead a capital gain.”  (Emphasis mine.  Source.)

That way they only pay only 15%, rather than 35%.  (Fleischer believes this is actually illegal even as many multi-millionaires continue to do it.)

Not only can the super-rich apparently choose their own tax rate — they can switch back and forth when it suits them, to make even more money.  They simply declare their losses at a 35% rate, while paying taxes at the 15% rate.  (Source — Rebecca Wilkins, senior tax policy counsel at Citizens for Tax Justice.)

Those of us stuck at a 25 – 35% rate on tips might wonder  . . . . how do they get away with this?

It’s simply, really . . . just follow the money

The people wheeling and dealing with their taxes simply contribute millions and millions of dollars to influence law-makers and politicians.  Using those clever financial terms, the “influenced” legislators pass tax-avoidance strategies designed only for the super-rich.

Thus the super-rich really don’t have to break any laws (in most cases) . . . because in essence they’re the ones who wrote the laws.  (Or more accurately, paid to have them written.)

Let me just say here, I’m not a communist and I firmly believe in the America way.  I’m not looking to demean someone’s success, or to redistribute any of their wealth.

I just don’t think multi-millionaires should pay at a tax rate one-half (or even lower) than that of bartenders, waiters and waitresses, and the other workers of this country.

Anyway, sorry for the rant . . . back soon week with more bar stories.

(We included the comments from the first time this was posted … please feel free to add your own.)

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AN OWNER’S FOLLY (The king and the tide)

Jake(One more bar post involving an Aesop’s fable . . . I can’t help it, those old scribes knew what they were talking about.)

I’ve known Jake for years. I trained him as a bartender when he was a few months away from his twenty-first birthday. It was like watching someone grow up, not as a parent watches a child, but more like a coach working with a new recruit and enjoying their progress in the game.

And to Jake, it always was a kind of sport, a game. This was his first real restaurant experience, but he had skills to burn. He was smart, coordinated and quick with his hands, and he liked to work hard. In a very short time he was cranking behind the taps, then gradually we began to run the bar together.

Jake was an easygoing, good-looking guy and the women loved him. There was one blonde girlfriend after the other. He’d bust his ass during the shift, drink hard when it was done, and at the end of the night go home with another hot babe.

Then he met someone he wanted to stick with and after a while they began living together. I could see the change coming. His girl had a serious, professional job. She worked days; he worked nights and weekends. Now he wanted to take off as soon as the shift was over, barely tossing down half a beer after work. I guess we were expecting it, but it was still disappointing when he told us he had another opportunity and would be leaving. He’d been hired as the day manager for a well-known Boston restaurant.

“You don’t know what it’s like out there, Jake,” I warned him. “We’re working for a great owner here. You might not find that where you’re going.”

It was true; we had an owner who treated us with respect, who was more than fair . . . and just as important, was willing to listen. Seriously, how often do you find that in the restaurant/bar business?

“I have to see what I can do,” Jake explained. “It’s a career move. Full benefits, better hours . . . my girl hates me working nights.”

“Just expect to be surprised,” I told him. “You’ve got it pretty sweet here. You have no idea how many insane owners and bad bosses are out there.” Over the next few months Jake called me at home now and then. He’d tell me how things were going and he’d talk about his new owner.

Then this week Jake mentioned his new owner only liked those people who unfailingly agreed with him. They were the ones the owner gathered around him, the ones he listened to. It didn’t matter what the owner said, or how ridiculous his ideas, all the owner heard–from a staff trying to get along with him–was how smart and wonderful he was.

Apparently Jake’s new owner felt like an omnipotent ruler. He thought he could just lift his finger and point, and splendid things would happen . . . often with results that were disastrous for everyone.

While listening to Jake on the phone, another Aesop’s fable came to mind. I reminded Jake of the old story about The King and The Tide. Everyone around this king told him how wonderful and powerful he was, trying to curry his favor. “You’re the most powerful king in the world,” they’d tell him, “there’s nothing you can’t do.”

One day some peasants came to the king with a complaint. Every evening, it seems, the tide would come in and wash away whatever they were working on. Surely the king, as powerful and brilliant as he was, could do something about this.

King_Canute_1So they carried the king on his throne down to the beach. As the tide came in, the waves washed over his feet while the king sat majestically on his throne. And the king declared, “Stop! I command you!” He raised one hand as he spoke to the encroaching tide. “I command you to stop!”

Of course, the water kept rising until it was up to the king’s ankles and then up to his knees. Soon the peasants turned away and left him there. Some of them may have been snickering behind the backs of their hands.

The king’s foolishness seems exaggerated and cartoon-like–but haven’t you all seen at least a hint of this delusional attitude . . . maybe in one of the bosses you’ve worked for or have known.

I was tempted to tell Jake that he should have stayed where he was; good owners are hard to come by. Instead I said, “Well, it could be worse.”

“If you were in the military,” I told Jake, “you might still have people above you who don’t know what they’re doing . . . and their poor decisions could cost your life.”

I asked him if he’d read Norman Mailer’s The Naked and the Dead, where a squad is sent on a suicide mission by a commander who thinks he is God, and is in a pissy mood.

I understand that the rank and file has to put up with bad decisions coming from the top–whether in the bar business, in office work, or at any job. “But how would you feel,” I asked Jake, “if you were being sent to your death because some desk-bound, superior officer was an idiot.”

“So it could be worse,” I told him.

“Yeah,” he said, “but it still sucks.”

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THE MIDAS TOUCH

midastouch(Here’s something from bartending at The Lark Tavern in Albany NY.)

“Johnny Walker Black, no ice, water on the side.” The guy was back again, as pompous as ever. He owned a popular bar on the outskirts of Albany, and he’d stop in The Lark now and then. I figured he came by to check the competition.

He was in his late fifties, but tonight he was accompanied by a young girl in her twenties. Later I’d learn she was a waitress at his place. She was his new girlfriend, and he made sure everyone in our bar was aware they were dating. It made you skin crawl, with the condescending way he treated her, but she just sat smiling.

Apparently she’d recently graduated from Albany State, and not sure what to do next she continued to wait tables. She was very pretty with a layered haircut and frosted lipstick, and she kept smiling and laughing when he made lame jokes.

I wanted to tell her about all the other waitresses he’d brought in over time–there was always a young chick on his arm. From the bartenders at his place, we knew he kept an unfilled spot on the waitstaff schedule in case a cute girl walked in looking for a job. He’d date the new waitress, then when things fell apart, he’d fire her and hire the next cute one.

“You didn’t see my empty glass?” he now snapped from his barstool. He never seemed embarrassed to pull the same trick, every time he was in here. He’d be busy talking when I stopped by to check, as though too occupied for me to interrupt. Then as soon as I left, he’d gulp down his drink and act as though he was getting bad service, sitting with an empty glass.

For someone who owned a bar and had a lot of money, he was one miserable fuck, with a bitterness that oozed from every pore on his greasy face.”I was just here a minute ago,” I said with a half-cocked smile, then went to pour his scotch. I could give a shit about these games or what he thought.

As I returned his change, I recalled the old parable of King Midas and his magic touch. I’d read it as a child, in a book with large watercolor drawings. Apparently a sorcerer had offered the king one wish, and his majesty foolishly requested that everything he touched would turn to gold. Soon the king was rich beyond imagining, and his days were spent reveling in his new wealth as though gold was the only thing that mattered to him.

midasDaughterOne day the kings’ young daughter hugged him goodnight and as he put a hand on her shoulder, she turned into solid gold, too. King Midas spent the rest of his life with no living beings around him, just gold tables and chairs, and frozen people-like statues.

“That’s this guy,” I thought now looking at the man with his young waitress girlfriend. “And that’s why he’s so bitter.” All he carried about was making more money, always scheming and conniving, trying to take advantage of someone. To a large degree, other people didn’t simply exist for him. They were only there for him to cheat, so he essentially lived out his life by himself, resentful without realizing he had no one else to blame.

Kate O’Connor happened to stop at The Lark a short time later. We talked about the guy and how his miserable attitude put off everyone around him. He’d soon be sitting at the bar all alone with his date, a woman who couldn’t leave. I told Kate the story about the king with the midas touch. “Interesting,” Kate said, “if that’s what the parable really means.”

“James Baldwin said the same thing directly,” she continued, “and he said it better.” Then she quoted a line from the new Baldwin book she’d been reading. “People pay for what they do, and still more for what they have allowed themselves to become. And they pay for it very simply; by the lives they lead.”

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“MOUNTAIN”

vaseIt was by far my all-time-worst bartending experience, and it started with a simple but nasty prank among friends.

Who knows how long everyone had been picking on the guy they called “Mountain.” His friends had been teasing him at least since high school, when he didn’t try out for the football team even though he was a big, strapping kid. He was a mellow sort, not interested in sports, so they began calling him “Mountain” to bust his chops.

Now they had all graduated–some of them taking jobs in their hometown of Cortland, NY–and after work they’d hang out at the bar I was running on Main Street, a place called The Mug. At the bar they continued to constantly taunt “Mountain,” although it was usually in a light-hearted, among-friends way.

One afternoon, Mountain happened to mention that he’d dropped off a new couch for the parents of another guy sitting at the bar. Mountain was employed by a local furniture moving company. “You were at my dad’s house?” Pat O’Neally JR. asked.

Mountain probably shouldn’t have said anything–because Pat came up with a plan to bust his balls. At the pay phone, he called Mountain’s boss, pretending to be Pat O’Neally SR. “Yes, that’s right,” Pat JR. said over the phone, “When they dropped off the couch, I think they stole an expensive, imported vase. There was a big guy with them . . . I think his name was “Mormon” or “Mountain” . . . something like that. Yes, thank you for looking into it”

“You’re in big trouble now, Mountain!” one of the group laughed as Pat O’Neally JR. came back to the bar. Everyone was laughing, and Mountain just sat there embarrassed. They had called his boss.

I probably should have done something, maybe stopped Pat JR. earlier, or intervened now as they continued to rag on Mountain. Customers expect the bartender to keep things under control. With everyone laughing and cheering, Mountain was devastated, his face beet-red. He got up and stormed out.

Half an hour later, Mountain returned. He burst through the front door and without saying a word to anyone, headed straight to the men‘s room. He slammed the bathroom door shut behind him. A second or two later, we heard . . . “BAM! . . . BAM!” . . . it sounded like two, loud gunshots!

“Oh, Christ!” I thought. “He was so upset, he came come back to kill himself in the men’s room!”

I stood behind the bar feeling sort of paralyzed, a little sick to my stomach. One of the Tobin brothers was now trying to push into the bathroom, but someone was blocking the door from the other side, pushing back against it.

“It must have only been firecrackers,” I told myself now, watching Ken Tobin still trying to force his way inside. After all, there had been two loud bangs–that didn’t make sense. No, it must have been firecrackers, or something.

Now the bathroom door finally opened, and Mountain stepped out. He began walking past the scattered tables up toward the bar. “Mountain!” I yelled. “Mountain . . . get the fuck outa here!” I was pissed that he’d set off the firecrackers, pissed because he had me worried for a minute.

But Mountain just kept walking toward me. “Mountain, get the fuck out of here!!!” I yelled again.

Mountain was a lot bigger than I was, but I’d been a Phys. Ed. Major in college and a collegiate wrestler, and now I was studying karate with Masataka Muramatsu in the dojo on the second floor above us. Besides, all my frat buddies–like all-American football player Jim “Cowboy” Van Wormer, and all-American lacrosse player Paul Wehrum–they were the other bartenders and doormen at The Mug. Nobody messed around in our bar. Mountain should have been listening to what I said. Why wasn’t he stopping?

He kept coming toward me. The people on either side seemed to lean back and shy away as he passed through the crowd.

Then I noticed his hand, down by his side–he had a gun in that hand! It looked like a small 38. Caliber pistol, a “detective’s special.”

By now everyone else saw the gun, too, and the place became suddenly silent. As Mountain got to the bar, everything seemed to slow down. No one was moving. Everything was frozen.

detective specialMountain lifted the gun, cocked the hammer back, reached over the bar and put the barrel to my forehead. I was staring down the barrel of a gun, with its hammer cocked.

The first thoughts running through my mind were all the reasons I didn’t want to die. There was a cute coed from Alpha Sig who had been at the bar last week–I had a hunch she was interested in me. Now I’d never have the chance to be with her?

I thought of all my plans, what I hoped to do with my life . . . moving to Boston, writing a book. I thought about the whole world, this earth and our solar system, and the entire universe. The way our sensory system works that entire universe was in my brain–and now a bullet traveling at some ridiculous speed was going to blast everything in that universe away?

“I’m not ready to die,” I kept thinking. For some reason I wasn’t panicked; it was more like a matter-of-fact observation. “I don’t want it to end this way.” Then I began to pull my thoughts under control. “Stop wasting time,” I told myself, “concentrate on the current situation.”

We had practiced a drill in the karate school upstairs. It was designed for exactly this type of emergency–someone holding a knife or a gun to your face. It was a simple, lighting-fast move and it had worked every time, at least in class. Should I try that move now? I was worried I might not be able to do it successfully. What if Mountain was just trying to scare me, trying to save some face after being humiliated earlier? What if I attempted the move and the gun went off accidentally? I might be shot and killed, whereas if I hadn’t done anything I would still be alive.

I went back and forth debating these options, for what seemed like such a long, long time. Then I started to think I should at least try something. I shouldn’t just stand here and be shot without putting up a fight.

Suddenly all the sound came back, and everything began racing fast again as I threw the move without knowing I’d even made a decision.

It worked, just like in practice. With a quick slap of my hand, I pushed the gun aside, coming back at the same time with the other fist to punch Mountain in the face. The gun clattered on the floor behind the bar, and Mountain fell down, disappearing on the other side.

The Tobin brothers picked Mountain up and dragged him out. I called the police, then called the owner of The Mug. “God Damn it!” Tony, the owner, said over the phone. “I don’t want any trouble in that bar!” Tony owned three bars in town, and a regional pinball distributorship.

“Tell them not to press charges,” Tony told me. “Just let it slide. I’ll talk with the police chief. You know I’m responsible for anything that happens down there?”

Back behind the bar everyone was asking how I was–had I felt scared? Where did I learn that move? The funny thing was . . . at the time, I really hadn’t felt scared. Right now I was struggling to act normally, with my insides rattling from the top of my head down to my feet–but at the time it was more just pure thought, no feelings at all.

I started to tell the regulars everything I had been considering, how long I’d thought about why I didn’t want to die, and what options I’d mulled over–but they were looking at me funny. They all insisted that as soon as Mountain raised the gun to my forehead I had slapped it away immediately, and punched him. They insisted the whole thing took place in a split second. “It happened so fast I didn’t have time to put my beer down,” one of them said, still looking at me strangely.

But in my mind, it had been a long, long time as I stood looking at the gun in my face, thinking about so much with everything frozen.

handcuffs“You know he’s basically a good kid,” a detective was saying about Mountain the next day over the phone. A policeman on foot had picked up the gun a few minutes after the incident, and now one of the detectives was calling the bar the next afternoon from the station.

“I’d hate to see him get in serious trouble because of one stupid mistake,” the detective continued, “he was only trying to scare people.” I knew the detective wanted to steer me away from pressing charges; he didn’t have to worry. Tony had already told me not to do anything, and besides I didn’t want Mountain to come back some day and this time really shoot me. Mountain was now barred from The Mug and that was enough. Actually, I felt bad for him–that he wouldn‘t be able to come in here anymore. It was something that just got out of hand.

“From now on be more careful what you let happen in that bar,” the detective was saying. “You’re supposed to be in control there . . . they never should never have done that to Mountain in the first place.”

The Mug was my first bartending experience, and I was still learning on the job . . . but yeah, the detective was right about all of that.

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A QUICKIE (POST)

3d kids jump and laugh in a partyStarting in September 2010, we posted weekly at Life on a Cocktail Napkin for three years–then this past year there were a few missed weeks, and a few more, until lately it’s only been once a month. For a good reason, though. As some of you know I’ve been trying to finish a book . . . and it’s done! Yup, finally. Hurray.

But now it’s the last day of the month to post, and I need a little more time. Coming this Friday is the story of my worst (by far) bartending experience. I was working in a joint called The Mug when a customer walked up, pulled out a gun, cocked the hammer back and reached over the bar to put the barrel of the gun to my forehead.

That’s coming Friday. For now, I thought you might enjoy one of the funniest videos I’ve seen in a while. The guy in this vid has a great sense of humor–his stuff is tight and on point throughout, but it’s delivered casually and the musical element makes it go down easily. So if you want a biting, anti-Justin-Bieber lesson on how simple it is “to create a hit pop song with no talent,” click on the image below. And we’ll see you Friday for a new post.

 

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