Chicago to End Tipping – ALL Servers Good and Bad Get $15 an Hour

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Unleash Prosperity Hotline
Issue #869
10/03/2023
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1) Chicago to End Tipping – ALL Servers Good and Bad Get $15 an Hour
Chicago is set to raise the minimum wage for tipped workers to the rate for all workers – more than $15 an hour. The socialist mayor Brandon Johnson supports the idea because it ensures worker “equity.”

Really? This means tipping at restaurants and stores will be effectively eliminated. No more pay for performance. A surly or slow server at a restaurant will get paid the same as an attentive and friendly one.

What will this mean? Universally mediocre service. Under this pay system, excellence is punished and mediocrity is rewarded.

The Illinois Restaurant Association opposed the mayor's plan, but with a gun at their head has agreed to a "compromise" five-year phase-in.

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Washington, DC, California, Oregon, and Washington State have adopted some cristion on this policy.

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Getting rid of tipping isn’t just bad for customers. It’s even worse for the actual workers.

A few years ago, one of the best economists around, Richard McKenzie, did a survey of restaurant workers, and here is what he found (edited):

I interviewed 40 servers in eight Orange County, CA “casual” table‐​service restaurants. All interviewed servers scoffed, without hesitation, at the idea of giving up their tips for a “mere” $15 minimum wage. I then asked what minimum wage they would accept in exchange for giving up tips plus the then-$10 minimum wage. Their responses ranged from $18 to $50 an hour. That median translates to slightly more than $36 an hour today...

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2) Biden’s Biggest Ever Tax Increase on the Middle Class
Biden is on a path to impose the biggest tax increase in history, without Congressional approval. We are talking about the hidden tax coming from regulatory costs. As Casey Mulligan has shown in a recent report, the Biden administration’s first two years of rulemaking created more than $1 trillion in regulatory costs or about $10,000 per household. That’s a “tax” we all pay yearly (unless we get a new president who reverses these regs).

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This "tax increase" on workers is the equivalent of a 0.5 percentage point hike in both employer and employee FICA payroll tax rates.

Of course, Biden continues to regulate in 2023 and will continue to do so until he leaves office. We estimate that eight years of Biden would translate to $60,000 of regulatory costs per household, which is like permanently increasing both FICA rates by 3 percentage points.

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3) Chart of the Day – Soak the Rich Tax Rates Don’t Raise Revenues
We’ve warned that if Democrats sweep the elections in 2024 – and win the White House, Senate, and House – this will unleash a Bernie Sanders “soak the rich” tax increase almost unprecedented in American history. Tax rates on income and capital gains will rise to 50% or more.

But this chart from our friend Brian Riedl of the Manhattan Institute tracks the income tax for almost 100 years and shows that higher income tax rates on the rich are NEGATIVELY associated with income tax receipts. In the early 1960s, when the top tax rate was 90% (!) income tax revenues captured roughly 8% of GDP. That was exactly the same tax-take after Reagan chopped the highest income tax rate down to 28%. Today at a 37% top tax rate (down from 40% during the Obama years) the income tax revenues are roughly 10% of GDP – again far higher than when the top rate was 70 to 90%.

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There are two reasons that raising income tax rates is a futile way to raise revenue. First, the higher the tax rate, the more loopholes Congress adds to the tax code to get around the high rates. Second, high tax rates slow down the economy and thus depress tax collections.

Is this really so complicated?

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4) Kansas To Use Coal Plant to Power EV Battery Factory
The Kansas City Star reports that Evergy will delay the retirement of a coal-fired plant until at least 2028 to meet the massive city-sized energy demand of a new Panasonic electric vehicle battery factory:

Even before Evergy learned how much demand Panasonic would create, the utility had already decided to postpone by a year the retirement of coal-fired Unit 4 at the Lawrence Energy Center, originally set for late 2023 or early 2024. Unit 5 was also expected to transition to using natural gas. But in June, the utility said it will keep burning coal at the plant until 2028 and would then transition Unit 5 to gas to provide power at times of high demand.

Wow. Biden's "energy transition" is REALLY working. This reminds us of the famous New Yorker cartoon of a massive electric fan blowing into a windmill to make the turbines turn.

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5) Electric Bus Experiment Crashes and Burns in Wealthy Jackson Hole
Speaking of green energy flops, this one is almost comical.

Jackson Hole, Wyoming has the highest average income per capita of any county in the United States, at $252,000. It’s filled with very rich and very bleeding-heart liberal residents (Donald Trump won less than 30 percent of the vote in 2022). Teton is also one of the most highly “educated” counties in America.

So naturally, they are all in on the Green New Deal. As such, the transit system run by Teton County began to replace its diesel buses with electric. But now, none of its eight electric buses are running and the company that built them is bankrupt.

The county commission rejected buying clean natural gas vehicles despite a readily available local gas supply. They instead bought electric buses from Proterra, a California company that had received massive federal subsidies has declared bankruptcy.

The “green” buses have been breaking down in cold weather (which is most of the time in the mountains of Wyoming) and the heating needs to sap the juice from the batteries. Many of the malfunctioning buses have been abandoned already.

How can supposedly smart people be SO stupid?

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6) Safety First

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