Less than two years ago, Las Vegas’ biggest hotels entered an agreement with the Internal Revenue Service to withhold income taxes from the estimated tips of union members.
Withholding formulas were based on a variety of factors, including overall resort revenues and the days and times of worker shifts.
The arrangement gave the voracious tax agency a slice of tip income that might otherwise go unreported in exchange for a promise not to audit workers.
Unions don’t often enter agreements that are unfavorable for their members. So you know Culinary members are benefiting from the arrangement with the IRS because 90 percent of tip-earning Nevada workers participate rather than keep their own earnings calculations.
Alas, the union suffered a sudden case of buyer’s remorse when the economy went south. Culinary officials claim workers’ tip income has fallen 50 percent amid a downturn that has fewer visitors spending less money inside Nevada hotels. In response, the IRS agreed to reduce required tip income declarations by 20 percent.
But Culinary officials aren’t happy. If they can’t get a sweeter deal, their members might leave the voluntary program and track and report their tips on their own — which is to say they might low-ball their gratuity estimates even more than the IRS already allows.
All this nonsense is a symptom of the country’s Byzantine income tax code. The system is so inherently unfair and incomprehensible that the IRS is willing to accept formula-based tip estimates — guesses — which obviously spare some Culinary members from paying their correct tax bill. A simplified income tax system that does not favor politically connected interests would preclude the need for such deal-making.
The great irony in this story, however, lies in the Culinary’s activism for higher taxes. The union stages rallies for Democratic candidates who openly advocate increased government spending and the redistribution of wealth. The Culinary lobbies to enrich government services (and their unionized work forces) through punitive levies which discourage the kind of investments that create jobs. The Culinary also opposes every effort to limit tax rates and the growth of government budgets.
In other words, the Culinary wants local, state and federal governments to seize piles more money — but raises a ruckus when the IRS attempts to get a handle on how much union members actually take home.