View this post on the web at [link removed]

Less than a week into his second term, President Donald J. Trump vowed [ [link removed] ] from the stage of a presidential rally in Nevada that “[w]e’re gonna get it for you—no tax on tips.” If this seems like a déjà vu moment, that’s because it is.
On June 9, 2024, then-presidential candidate Donald Trump grabbed media headlines when he spontaneously declared [ [link removed] ] during a Nevada campaign rally that eliminating taxes on tips was the “first thing” he’d do upon taking office. (Vice President Kamala Harris—in a rare moment of bipartisan unity—also wound up endorsing [ [link removed] ] the idea.) But what many dismissed at the time as Trumpian off-the-cuff bluster is now looking like a very real possibility.
“If you’re a restaurant worker, a server, a valet, a bell hop, a bartender, one of my caddies,” said Trump, “your tips will be 100% yours.” Members of Congress have introduced [ [link removed] ] a bevy of different bills [ [link removed] ] seeking to accomplish this end, all of which vary in flavor but not in ethos. Viewed from the vantage point of government officials and wonks in Washington, D.C., no-taxes-on-tips received mixed reviews at best as a public policy concept. But it hit the bullseye in terms of political impact.
That’s because the businesses that comprise the restaurant industry—and the (often tipped) employees who work within them—are the veins through which the lifeblood of America's middle class runs. These businesses also provide America’s formidable economic engine with much of its fuel, leading some commentators to suggest that “as restaurants go, so goes the economy.”
In addition to providing jobs and generating economic benefits, restaurants serve yet another irreplaceable function in the American landscape: that of a cultural hub and communal gathering place. From Tuesday trivia at the local brewery to Sunday Bible study at the neighborhood diner, food and beverage spots are in many ways the rock upon which modern American civil society is built and sustained.
For its part, the restaurant and hospitality sector has shown incredible vitality coming out of the COVID-19 pandemic—a testimony to the industry’s resilience after many predicted [ [link removed] ] its demise. Despite its admirable buoyancy, the humble restaurant faces substantial and even potentially existential challenges in the years ahead.
A burgeoning “war on restaurants” by the progressive left threatens to upend much of the regulatory and legal structure under which the industry has operated for the past century. From targeting key pieces of infrastructure the sector relies on—such as the commercial gas stove and the drive-thru window—to drastically raising the minimum wage in a way that disrupts the industry’s long-standing tipping traditions in the labor sphere, the left appears determined to alter America’s culinary landscape.
Community Vitality and Economic Importance
From colonial taverns in the lead-up to the Revolution to Black-owned restaurants in the American South during the civil rights era, restaurants have maintained [ [link removed] ] their position as cornerstones of civil society and political association throughout our country’s history. Partly due to this lineage, restaurants have come to be seen as exemplars of what sociologist Ray Oldenburg termed [ [link removed] ] “third places”—spaces where individuals and groups spend time between home and work (with home being the “first place” and work being the “second place”). In addition to restaurants, third places can include churches, fraternal organizations, public parks and community centers.
According to Stuart Butler and Carmen Diaz of the Brookings Institution, third places [ [link removed] ] are “locations where we exchange ideas, have a good time, and build relationships.” At a time when church attendance continues to fall [ [link removed] ] and other third places [ [link removed] ] are disappearing [ [link removed] ], the plucky restaurant has valiantly carried what remains of America’s civil-society torch.
Americans themselves recognize how crucial the restaurant is to the nation’s civic life. In 2019, the American Enterprise Institute’s Survey on Community and Society [ [link removed] ] found that 44% of Americans view having a restaurant or other entertainment spot nearby as a significant part of what makes a community successful. Restaurants barely trailed public parks (45%) but far exceeded such institutions as churches (23%) and civic organizations (16%) in terms of perceived importance.
Beyond just your prototypical, independently owned neighborhood restaurant, a host of food and drink establishments serve as third places. In fact, some of the most successful third places today are craft breweries [ [link removed] ], which have become primary hubs for communal gathering and socializing.
Coffee shops—even the big chains—have also stepped into this role. Starbucks, for instance, has thoroughly embraced [ [link removed] ] the third-place ethos by encouraging its customers to linger in its cafes while also serving as a sort of public-utility provider with its free WiFi. Even more noteworthy is the rise of the fast-food chain as a vital community fixture [ [link removed] ] in towns across America, with McDonald’s outlets becoming home to morning coffee clubs, weekly bingo games, community meetings and even weekend Bible studies.
While clearly an indispensable braid in the cord of American civic life, the restaurant’s greatest contribution to our country may be its economic impact. It would be difficult to overstate the role that the restaurant sector plays in America’s economy. As of 2024, the industry accounted for nearly 5% of U.S. GDP [ [link removed] ]. All told, 15 million Americans work in eating-and-drinking establishments or other food-service enterprises—a number that comprises around 10% of the nation’s total workforce. In comparison, the automobile sector—a highly lionized industry in this country—employs around 4.3 million [ [link removed] ] Americans.
As important as it is to recognize how many people restaurants employ overall, it is also critical to appreciate whom they employ. The restaurant industry is one of a dwindling number [ [link removed] ] of American industries that does not require employees to acquire expensive educational degrees or hard-to-obtain occupational licenses. And importantly—especially in today’s political and policy climate—very little restaurant work can be done remotely or overseas. You can’t outsource the busboy job to China.
Put another way, if policymakers want to focus on the middle class—and if politicians want to attract working-class votes—they might be wise to ditch the hard-hat photo op at factories for the chef-hat press conference in restaurant kitchens. And yet, for everything restaurants have going for them—serving as community linchpins, crucial job creators and ladders into the middle class—the industry faces more threats than ever.
Bureaucracy on the Menu
Seemingly overnight, progressive government officials around the country have begun reinventing themselves as commercial architects and interior designers—in the form of banning drive-thru windows [ [link removed] ] from fast-food outlets (to reduce alleged traffic congestion) and prohibiting the use of gas stoves [ [link removed] ] inside restaurant kitchens (due to environmental concerns). But while this assault on restaurant infrastructure is ominous, it is in the labor sphere that our country’s food and drink establishments face the greatest headwinds.
Few workforces have attracted as much controversy over the years as restaurant employees. As far back as a decade ago, The Boston Globe argued in an editorial [ [link removed] ] that “[w]hat goes on behind the kitchen doors is grim”—referring to allegedly low compensation levels, lack of benefits and work schedules that “often change on a weekly or even daily basis, making child care a nightmare to arrange.”
Thus far, the political left’s primary response to these issues has been to push for extending traditional minimum-wage policies to the restaurant sector. For decades, restaurants have been able to use what is known as the “tipped-wage credit,” which allows them to pay their workers at sub-minimum-wage levels so long as tips make up the difference; if tips fail to cover the gap, restaurants must backfill their workers’ wages. This setup has drawn fire [ [link removed] ], with claims that it leads to restaurant workers earning less than they would otherwise, along with allegations that some restaurants fail to accurately ensure that tips are bridging the minimum-wage gap.
Liberal environs like Washington, D.C., have responded by eliminating [ [link removed] ] the tipped-wage credit and applying traditional minimum-wage laws (eventually up to $16 an hour in the District) to servers and bartenders. Additional deep-blue states like New York [ [link removed] ], Connecticut [ [link removed] ], Maryland [ [link removed] ] and Illinois [ [link removed] ] have considered their own versions of minimum-wage bills for servers.
It is far from certain that hiking the minimum wage and abolishing the tipped-wage credit actually helps workers. Not only did some servers in D.C. report earning upwards of $30 or $40 per hour [ [link removed] ] prior to the tipped-wage credit’s elimination, but data from the Bureau of Labor Statistics shows that full-service restaurants in Washington, D.C., have cut [ [link removed] ] about 1,800 workers since the advent of the new minimum-wage law.
Diners, of course, also suffer. Michael Strain and Kerry Papps recently published research [ [link removed] ] finding that for every $1 increase in minimum wage, restaurants can be expected to raise the price of their food offerings by an average of 7 cents. D.C. has also seen a rash of restaurants [ [link removed] ] tacking “service fees” of 10-20% onto customer bills in the wake of the tipped-wage prohibition, which functionally amounts to a stealth tax on the District’s diners.
The progressive effort to upend the restaurant labor force may have reached its peak in California’s passage of the FAST Act [ [link removed] ] in 2022. The bill created a 10-member Fast Food Council, appointed by the governor, to oversee fast-food and fast-casual outlets in the Golden State. As originally designed, the council’s power included the ability to raise the minimum wage for restaurant workers as high as $22 an hour and to implement 3.5% annual increases beyond that; it also would have been given broad control over wages, hours and health-and-safety standards in the industry. (The council was partially defanged [ [link removed] ] in a subsequent détente between the restaurant industry and state politicians.)
The FAST Act was rightly seen as a none-too-subtle effort to have one central governing body set labor rules across an entire sector—a model popular in much of Europe and Latin America—rather than via America’s traditional system of company-level collective bargaining and unionization. Given the enormous importance of the restaurant industry and its employment of one-tenth of the American workforce, few doubted that politicians would soon seek to expand FAST Act-style councils to other states and even other industries. (Which indeed has happened [ [link removed] ].)
If nothing else, policymakers interested in helping restaurants survive and thrive in the years ahead should seek to protect the restaurant industry’s long-standing legal structures. But a fresh, forward-looking agenda is also needed for the American restaurant.
A New Agenda
The progressive push to import traditional minimum-wage rules into the restaurant industry amounts to using 20th-century labor policies to try to respond to the desires and needs of 21st-century restaurant owners and workers. Instead of looking to the past for inspiration—and rather than hyperfocusing on wages when many servers are quite satisfied with their (mostly tipped) take-home pay—policymakers should look to novel concepts like the portable benefits models [ [link removed] ] that are gaining traction in the gig economy.
Elements of a portable benefits system could make sense in the context of restaurant workers by permitting restaurant owners (alongside workers themselves) to contribute to benefits accounts that operate similarly to a Simplified Employee Pension plan or Individual Retirement Account SEP-IRA [ [link removed] ]. With these accounts, tipped employees who might otherwise lack benefits could attain paid sick leave, unemployment insurance, health insurance, tax-free retirement savings and other offerings. To encourage restaurant owners to adopt a portable benefits model for their employees, the system—drawing on gig-economy proposals that protect independent contractors’ status—could ensure legal protection and maintenance of the tipped-wage credit.
Right-leaning policymakers could also repurpose and restructure bad ideas like the FAST Act to show how sector-wide rules can be pursued via voluntary agreement rather than government diktat. A FAST Act-style council that can simply impose sector-wide rules through its edicts alarmingly mirrors aspects of European labor rules. Instead, policymakers should develop a more collaborative, industry-centric approach to the issue.
One potential option would be to establish a system of state-level “sectoral collaboration,” in which a council or committee contains a 50-50 representation of the interests of restaurant owners and workers. The committee could be empowered to rewrite any noncivil-rights labor or employment laws for the restaurant sector, but critically, these collaborative committees would be toothless to act unless parties from both sides of the labor equation agreed.
As one example of how this could work, such a committee could establish an opt-in system where servers who so chose could opt to keep 100% of their tips (and the chance to earn $30 or $40 an hour) in exchange for more scheduling predictability. On the other hand, different servers might opt for a traditional minimum wage of, say, $18 an hour along with on-call availability.
Finally, as lawmakers and regulators increasingly seek to insert themselves into decisions regarding kitchen appliances and floor-plan layouts—in the form of gas-stove bans and drive-thru prohibitions—a more adroit policy response would be to radically expand the ways in which the American restaurant can operate. Rather than banning drive-thru windows, height restriction ordinances could be eased to allow for new concepts like “elevated drive-thrus”—where the kitchen is housed on a second story of the building—to proliferate, creating more ground-level space for cars and easing drive-thru congestion concerns.
Lawmakers should also consider ways to make it easier for individuals to open new restaurants, thereby enabling more pop-ups and microrestaurants to flourish. Other than obtaining a basic food-service certification (and a liquor license, if selling alcohol), would-be restaurateurs should face little else in the way of burdensome regulatory hurdles when launching their establishments.
At a time when Americans can barely agree on anything, we can agree on the elemental call of the communal dining space, of a seemingly irresistible urge to convene, break bread and unwind within a rare communal bastion of sanity—one that somehow endures inside our ever more distracted and scattered age.
The roles played by the unassuming restaurant—community cornerstone, durable jobs provider, bedrock of the American working class—have become as essential as ever in modern-day America. But if we aim to cherish the restaurant as we know it, we’ll have to fight to keep it.
C. Jarrett Dieterle is a nonresident senior fellow at the R Street Institute. This article was adapted from the Winter 2025 issue [ [link removed] ] of National Affairs.

Unsubscribe [link removed]?