The Pew Research Center has released a study indicating that most Americans believe tipping is now expected in more places than it was before. The announcement was made on the organization's website, highlighting a trend driven by digital payment technologies, labor shortages, and inflation.
According to the study, there are point-of-sale systems, apps, and kiosks normalizing tip prompts across various businesses. Younger adults are particularly open to these changes, reflecting generational differences in service experiences shaped by digital interactions.
The No Tax on Tips Act (H.R.482), introduced in the House on January 16, 2025, allows employees in tip-based occupations to deduct up to $25,000 in reported cash tips from their taxable income, excluding those earning over $160,000 annually. It also expands the existing employer payroll tax credit on tipped income to include tips from beauty services like hair, nails, and spa treatments. This builds on current law, which only applies credit to food and beverage service tips.
A study published in the Journal of Business Research reveals that digital tipping is practiced in over 100 countries, with the United States accounting for $153.4 billion in annual tips. This includes $54.2 billion facilitated through digital technologies. The study introduces the concept of "guilt tipping," where customers feel compelled to tip more when observed during transactions. While businesses may see short-term gains from increased tips, there could be long-term effects such as reduced customer satisfaction and loyalty.
The transition to digital tipping platforms has improved transparency and efficiency in tip reporting. As noted by the Journal of Accountancy, the Internal Revenue Service (IRS) is focusing on digital payment data to ensure accurate tax reporting of tip income. This effort aims to address unreported tip income estimated at $1.66 billion annually.
The COVID-19 pandemic has also influenced tipping behaviors, according to a report from California State University, Northridge. Consumers have become more aware of the financial challenges faced by service workers, leading to discussions on gratuity practices and advocating for clearer wage structures.
Pew Research Center is a nonpartisan organization conducting public opinion polling and social science research on various topics. It operates as a subsidiary of The Pew Charitable Trusts.
