Part 3 of the Observations from America: Tipping and Taxes

When I was a kid in South Africa, we always used to tip. My Ma’s strategy was always to leave a small pile of coins hidden below the dishes. When I’ve gone back to Africa as an adult, there have been different strategies available for tipping, but it didn’t ever really impinge on my consciousness as a major thing. You pay a rand to the guy to watch your car, you add some arbitrary amount on at meals. Partially, that’s a factor of the exchange rate, which was R5.5:$1 last time I went back, which means no matter how extravagantly you tip, your meal is not going to be too outrageous. In Greece, there was also tipping, but it seemed to me like the tip was part of the negotiation you had with the maitre’d for the group meals that were my main dining experience.

In America, the situation is mathematically more complex, because the standard tip is double the tax. Tax, however, varies from state to state, and is also not included in the prices on the menu. So when you look at a $4.99 item, you need to figure out what the tax is, and then double that tax for the tip – roughly. Plus or minus a little for service; Hamish told me that if he ever sees the bottom of a “bottomless” coffee, that’s the tip gone. I’m not entirely sure whether that was a joke; I guess I’d just be happy to not have to drink the stale filter coffee anymore – but more on the coffee woes from guest author Clare, later.

To an extent, when I’ve been in Thailand or Africa, you’re dealing in such different magnitudes of money that it’s actually a bit easier, because you’ve got to completely overturn your expectations. In the US, I found myself always trying to do mental arithmetic like (Price+X% Tax+round(2*X%,0)+credit card fee)*NZ/US+exchange fee. If the tax had at least had the decency to be the same for everything everywhere, I think I could have gotten used to it.

While this was a bit annoying, I kept wondering why they had arranged their daily money in this way. Why persist not only with cash for most transactions, but ridiculous 1c coins? Why insist on hiding the true costs of everything?

I think in part, America is the land For Sale. It seemed to me that people were very proactive about selling their services – advertising was everywhere, and included a hefty component of people approaching you and making a sales pitch. I never encountered anything quite so blatant as the hawking of a Greek maitre’d, but there was that atmosphere anywhere in the cities. There was no service that wasn’t advertised on billboards and flyers and by people literally stopping you in the street and asking if you needed it.

It is easier to sell things if the number is low. People instinctively think about the $4.99 as a Lincoln with 1c change. They don’t think about $4.99+tax+service fee=Hamilton and change if you’re lucky. I guess natives must eventually adapt, but the fact that the price is $4.99 instead of an honest $5 to start with implies that someone somewhere doesn’t think so.

The second part is the tipping. I was first introduced to the politics of tipping by Quentin Tarrantino in Reservoir Dogs, and while I presume details may have changed, I’m led to understand that the basic situation is the same: wait-staff can and are paid less than the real value of their service to the business on the basis that the customer makes up the shortfall.

I had a South African acquaintance who, while complaining about the service everywhere in New Zealand, told me that tipping is the cornerstone of good service. It’s hard to deny rationally – good service may not get you much of a tip, but poor service is sure to scupper any chance of it. With very few exceptions, it did seem as if the wait-staff in the USA were far more interested in providing good service than they are here. Some places bordered on the uncomfortable, becoming almost obsequious, which my egalitarian NZ psychology was underprepared for.

However, it also seemed like tipping was assumed – I mention above about doubling the tax. Which means that, within certain margins, its actually probably fairly flat and so unlikely to change by a huge amount within a normal range of service. Clearly there’s always room for the exceptionally good or bad to receive their due reward – but on averages, surely it must even out? Which in effect makes the tipping part of a profit-sharing exercise, rather than a supplement to income. If the place you work is busy, you will get more tips in proportion to the sales of the company as a whole. Profit sharing on a very small scale. That means that great service is not only about you personally getting more money, but about growing the business – you want to get more repeat customers.

I am sure that on the whole, the proportions involved are such that the culture of tipping is structured such that it’s not as appealing for the workers as a representative average wage. I think that too is part of the American psyche though – that the expectation is that you must work for anything you get, anything you don’t have to work for is, broadly, an entitlement. The founding fathers didn’t fight off the British for you to be entitled to stuff – you have to pursue it yourself. Which relates back to their willingness and facility for selling whatever they have, whenever they can.

The conclusion I drew was that while not including tax or service at first looks just like an annoying piece of life-ergonomics, it is probably also a reflection of these deeper issues in the American psychology. But, this is just an anecdotal thing for a month in the South-West. I’m happy for more informed minds to correct any mistakes I’ve made in inference.

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4 Responses to Part 3 of the Observations from America: Tipping and Taxes

  1. Although I much prefer the NZ method of having tax included in whatever price you’re looking at. I can also understand to a degree the desire to show people how much tax they’re paying. Part of it is a way of the seller saying I’m only charging you this much, the government is taking the rest…But did you notice that fuel prices always include all of the taxes? You pump gas, you pay what the pump says, not what the pump says plus transit tax plus sales tax plus some enviro tax or road use tax or whatever…In Canada some of the gas stations started putting a breakdown on the pumps to show how much of the price was actually taxes, but the sign is still the total cost…
    In terms of tipping I was always told 10-20%. The fancier the place you eat at the higher the % should be, but also the better service you get the higher the % should be. Keeping in mind most places the servers will have to give a % of their tips to the person that clears the tables, and the cooks. But I always based it on the service and meal combined.

  2. robynjean says:

    I’d never really thought of the transparency issue before, Alaina. Good point, but still….. surely there are other ways of makign sure I know how much the govt is getting (like separating it out on the bill like they already do). Fair enough for tipping – you can (mostly) judge how much you pay based on performance (we had much lower than average service at a mexican place at Las Vegas airport which otherwise had much higher than average food – the waiter got $1). But, if a postcard costs $1.05, and then CA is going to stick on tax to make it $1.10 just write it on the price tag. It’s not going to change today or tomorrow, I’m not going to decide not to pay it so why not just be up front about it? Some friends in NH said it makes sense because it is different in every state – but that argument works only for chain stores where you might get annoyed if you are paying a shelf price $4.99 in New Hampshire, and $5.15 in Maine for the same product. The tax laws are different in those 2 adjacent states- you’ll be paying a different amount anyway.

  3. Hamish says:

    I don’t see it as transparency, I see it as blaming the government. “We’re only charging you this much, LOOK WHAT THE NASTY GOVERNMENT IS STEALING!” But, I have a low opinion of that particular aspect of American political discourse. (I’m sure part of it is so that multi-state chains can standardise prices without having to print different menus/materials in every state.)

    Standard tip is 15-20%. In California, tax is 8.75%, so you can just double the tax and you’re right in the tip zone. I then often round up or down to a nice number depending on how good the service was. If my coffee is empty, I may round down 😉 Good service (as is usual) and I’ll round up. That method might not work in other states.

  4. ellie says:

    Growing up in the USA, standard tip was always 15%, but the generally agreed-upon norm now seems to be 20%, adjusted up or down for bad or good service, but never less than 10% unless you thought someone spit in your food. (Interestingly, I would do the opposite of Alaina with regards to the quality of the restaurant – I would be much more likely to overtip a waitress at a cheap diner than at a fancy restaurant.) Another (recent?) custom is to tip $1 per drink at a bar, regardless of the price of the drink. I personally find the bar tip more egregious. I rarely buy a drink for more than $4, which means I’m expected to tip 25% for a drink I had to go up and get myself, generally fighting for the bartender’s attention, compared to 20% for table service at a restaurant?
    The wage supplementing theory is complicated. One of the reasons people say they wouldn’t tip below 10% without a really, really good reason is because they view tips as a wage supplement. In most states, wait staff are exempt from the minimum wage. I think in Delaware (at least a few years back), waitresses earn 2 something compared to the 6 something minimum wage. However, I don’t think that people tip any differently in states with and without a waitress minimum wage, which suggests that tipping isn’t really so much about individual’s rational choices as it is about culture and customs.
    The profit sharing theory is the more interesting one to me. Wait staff have a great interest in having high customer turnover and a full house (repeat customers or not). Cheaper restaurants tend to have very high turnover (so many meals at low cost), and fancier ones have much lower turnover, but for part of the spectrum, a waitress might make similar percentages off the total spend. I would imagine that a restaurant that is struggling to fill seats would also struggle to keep its wait staff, which in turn would probably make the restaurant struggle even more. Next time my sister is around, we should ask her for her thoughts, since she’s had significant experience as a waitress and a manager in both tipping and non-tipping environments.

    On the including tax in the price or not issue, Hamish’s point about printing labels for multiple states is probably a major factor! But I think culture and custom also play a big part. Americans who have not spent significant time in other countries don’t have any idea that sales tax could/would be included in the price tag. It just doesn’t even seem like an issue. It’s only foreigners (or people from no-sales tax states like Delaware) who get all worked up about having to pay $1.06 for a 99c item. It’s illogical that people feel differently about gasoline, alcohol, and cigarette taxes, which are hidden within the price, but people are just used to it. I wonder if people really saw the tax breakdown on items, there might be more popular revolt of the type Hamish describes! (of course, I tend to think transparency in taxes is a good thing.)

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