Dashboard: Stop Taxing Tips? Really?

[Music] welcome to another 21 hats dashboard brought to you by our sponsor the great game of business I'm Lauren Feldman and I'm here with Jean Marx welcome Jean hello Lauren how you doing this week doing good actually winding down this summer getting ready to do some traveling as well but we'll have lots to talk about you're always doing traveling not not in August it's slow in August that's people are enjoying their families and then uh but then it picks up in September forgot if I told you I'm going to spend the month of January in lunch L again so that should you did mention that that's uh that's very cool we can be doing th these conversations while I'm there I'd like to do more reporting on how UK businesses are fairing in this world anyway topic for another time uh how about this topic Jean I I'm really curious about the uh proposals uh that are floating around about not taxing tipped income um what do you think of that let me explain it first and I'm going to be writing about this I think um in the next week or two but it's it's and so I'm glad you brought the topic up because it helps me formulate my thoughts you know so both candidates uh you know vice president Harris and former president Trump have proposed not taxing tipped income now right now you know tips are taxable and uh they're supposed to be reported God only knows how much tips are actually reported or not reported in this world I mean it might not even be a thing because people people don't report tips but most most restaurants have a requirement to report you know um income for their employees particularly to their states so they have to track tips and and so and it's a taxable thing so well Jean let me say I assume Jean that the less we all use cash the more those tips end up being reported you're exactly right so there's a record of it and again restaurants themselves or service business are you know required to report tip income that their employees received so so it's out there I mean the only time it gets away I mean I remember my daughter when she was you know for she waiters for a number of years and was always like yeah we like getting tips in cash that way nobody knows about so that that's a little bit of advice for you by the way if you want to really make a friend of your server tip them in cash they love you for that rather than just writing it on the check you know um so so both candidates um want to eliminate taxes on tips and it's kind of a redonkulous idea to be honest on because you and let me let me explain to you why this is I mean for it's such political pandering on both sides you know because they know you know there's a lot of younger workers a lot of younger voters that are out there that would be like Oh yay no no taxes on on my tip income and and you would originally think like okay well that's nice because these people work hard and you know and and that would benefit them and I you could even make a case that for a business owner not taxing tips is good it encourages people you would probably to tip more the more people tip the compensation that your employees are receiving through tips the less pressure there is on the business owner right to pay uh you know even a minimum wage so you know they can go out there and you know they feel like good please tip my employees so I don't have to pay them more so you know that would seem like a good thing but not tipping tax not not taxing tips is it goes well beyond that I mean for starters it's very discriminatory I mean you know imagine you're you're trying to attract hourly workers to to your man manufacturing business or to your you know distribution business and now you've got a whole industry this service industry where those people you're going after will be like screw that man I'll go and I'll work you know in the service industry and my income won't be taxed because I you know because it's mostly tip income do you know what I mean like I think it really works against people in other Industries you were gonna say well I was gonna say I think it's even worse than that I agree with everything you just said but you you would know more about this than I would but my understanding is that There's real concern that people in other Industries would start changing the way people are compensated and start pretending that people are getting tip income uh to avoid taxes even when it it really isn't a tip dude you missed your calling you should have been an accountant Lauren you really should because you're exactly right that was the next thing besides it being discriminatory defining what a tip is can you imagine I mean you know for starters like every business owner would would have all this incentive to just redefine to all compensation as tips you know why because while your employees don't get taxed on it then as a business owner you don't have to pay employer taxes on it either you could even go to your employees and be saying to them like hey you're getting all this income now that's not being taxed so I can even give you a little bit less you know so save money for myself you there's all reasons to screw around with the definition of tips you know what I mean sure I can just see like you're in a coffee shop and you're like oh no I don't I don't compensate my employees I just collect money from my customers all day and reimburse my employees for the tips that they received you know I mean it just seems so abusive and then enforcing it has got to be a major nightmare I mean it just it does make me laugh that political candidates can just make these sweeping gestures like yes we're going to eliminate tips on taxes on tipped income and then they they they have the agencies then have to figure out how the this is going to work in real life you know what I mean and doing that is just um it's just it just a can of worms defining what that income is so I just think it's a bad idea all around I think both candidates uh you know they're again they're saying it because they're trying to attract that voter but I think it's a a Dopey idea my guess is it's a Dopey idea that has no hope of going anywhere um yeah I I kind of hope that's the case if if it were to go somewhere the other thing that I don't like about it is it I you know the tip system is a terrible system to begin with and this would just further entrench it which um seems pretty crazy too you're right and and by the way again getting back to the advice that you gave me a few weeks ago when I do write about this I'd like to offer some some Alternatives what what really should be going on and there's really two things that that I would offer number one is rather than going through all this rigar roll of like taxing tips maybe National legislation Banning tips you like no more tips in this country not allowed to do that employers have to pay what they got to pay and if they have to raise prices by 20% what's the difference anyway because we're paying 20% more you know in tips you know and that way so many countries do it this way I mean get rid of tips that's that's that's one alternative right I I like that in part because you know there are lots of restaurants that have tried to go to a no tipping system and I guess it's work for some but many have reversed uh because they were losing employees who could make more money at another restaurant where they would get tipped if it's outlawed for everybody that ceases to be a problem it does and it really levels the playing field as well and some restaurants do better than others and again getting back to my daughter when she was a server I mean people used to fight over certain shifts on certain days because those were like when the most traffic was you know and they would get better tips you know at those times so it really just uncomplicates a lot of things ban tips already so that's number one or if you're going to have tips then raise the minimum wage on tips you know like in pennsylv I think it's $215 or $285 is like the minimum can you imagine it's the minimum wage you pay but and if your tips don't reach the state's minimum wage which is $7 25 cents an hour then you have to pay you know you got to make up the difference you know which is complicated and Dopey and still underpaying people as well so not that I'm a huge fan of minimum wages I know you're already know you sink your claw that that that thought was occurring to me G yeah I know that but I'm like listen it could be the other old turn I'm not I'm not I'm less of a fan of T not taxing tips so just then enough we already have minimum wage then increase the minimum wage if you want people to get paid more uh I would rather go that at least there's a system in place to do that you know what I mean yeah so anyway all right we we solve that one um let's talk about a piece that you wrote last week um that I was surprised to see because you you've you've consistently warned us that AI has unbelievable promise but isn't necessarily ready for prime time yet but you wrote a piece saying that for manufacturers at least and a few other businesses you'll you'll tell us which ones um it's starting to get real tell us about that it is starting to get real and and I also just want to be clear like you know while AI is still very much in its early days and most small businesses are really doing their thing with you know chat GPT and you know those generative AI chat Bots um you know that that does not take away the fact that AI is coming and becoming more and more real every day and so when I go out and I speak to these groups like for example like you like I'm I'm speaking in a few weeks against September to a manufacturing group on AI this is what you know this is what motivates me to write this stuff because then I'm like okay well I got to tell them what's going on in AI for manufacturers so I you you do your research and you write about it I write about it for Forbes and uh you know there's there's a lot going on in in Ai and and let me explain what I mean when you dig into it I mean there are like I can't even count them up there's got to be like a dozen companies I mentioned alone in in the field of Robotics you know that are like Walmart right now has autonomous forklifts you know and Amazon has little humans shaped warehouse robots you know and other companies um I mentioned some in this column agility robotics 1X Boston dynamic you know ectronic the these and I just did a handful of these they they they literally are manufacturing these humanoid robots that c can walk and carry stuff and and you know find safety issues and um you know Patrol you know warehouses uh they they can actually do things like clean and disinfect I mentioned they can carry it around they can they can sort Parcels as well I mean and these are like in existence like if if you look at my Forbes column you'll see I mean again I list a bunch of companies here that that are making these these robots now they're not cheap I mean you know they're they're tens of thousands of dollars each for these things but they're they're coming down in price quite a lot and in all honesty their their abilities because they're they're powered by um AI capturing you know video for example that can translate into data and text and then perform actions it's really it's amazing stuff and that's just the robotics Lauren then I started looking into internet of things and there there's a whole bunch of companies that are making iot sensors um and companies that are using it like Rolls-Royce you know they have like you hundreds of sensors on their engines they they're one of the biggest airplane manufa engine manufacturers in the world and they have ai generated sensors that are listening for any problems and warning of maintenance issues you know while while planes are up there and then these big you know oil and gas companies that have sensors everywhere to automatically you know detect evaluate alert shut stuff down turn things off if like some flow of liquid or something gets interrupted along the way or it senses smells or some type of an issue um so I'll stop talking because I'm only halfway through this column you know what I mean there just a lot there's a lot is there anything in particular that caught your eye that you thought this is something that smaller manufacturers should be jumping into right now yeah as a matter of fact yeah and in fact the last section of my my this column I talk about um consolidating data you know um the robotic stuff is important the autonomous vehicles are important The Internet of Things They are important it's all here and being used but what's really important for smaller companies is their data I mean they're using Erp systems CRM systems they're capturing data on their machines they're capturing their data you know on their their order entry platforms their barcoding systems whatever everybody's got data all over the place and people are realizing this and because of that uh there has been now a bunch of startups and again I mentioned them in this column a number of them that are um you coming up with processes for Gathering data from a bunch of different places putting it into one large language model no easy feat by the way you know um and then coming back and allowing then their customers to then interact with it like chat GPT so you know they're they're getting to the point now where you're like okay you know I've got this order from this client which is similar to another order that I had in the past what would be the best machine to run this order on what's the best time a day who's the best uh employee out there the most productive employee that should be running this job what would I expect my uh you know my gross profit to be on this job if I price it at this amount and right now you can't really ask all these questions to one place but these consolidators are starting to bring together all this data to allow manufacturers to do that and I warn you that's still early days you know I mean it's we're still it's not like you can just go and buy something like this off the shelf and if you really are desperate for something like this you're probably going to have to hire one of these companies to do like custom programming for you and it ain't going to be cheap but it's heading this way Lauren it really is and and these you know a lot of these startups you know within the next five seven years or so they will have um you you your applications that you can download and buy and connect it into your machine and connect it into your Erp platform and other places and then it will just draw in the data we be able to understand the data uh allow you to start training that data and then like interacting with like this super duper expert on your production floor to get you know to to advise you as to the best way to run jobs it's amazing it's amazing stuff the notion of sharing all your data with a startup makes me a little nervous is there a reason why it's startups that are focused in this area this seems like something that all the big companies would want it's great it's another really question so the big companies themselves um that are not software companies are are building their own large language models so yeah I mean like Caterpillar for example and Deer uh and and companies like them are but they're spending millions of dollars on building their own large language model extract but what about a a company that is a software company what about Microsoft why aren't they providing this to Microsoft Pro would would tell you I mean they don't have anything off the shelf that's doing it they would they would point you towards their network of Microsoft partners and developers and say listen talk to them we provide them with a bunch of tools they can use so they can write these applications for you but you're not going to be able to download something out of the box and frankly Microsoft has never really done anything like that I mean when you think about the products that Microsoft sells they have enduser applications business applications and personal applications but for anything more complicated than that they lean on their their their Network their their partner Channel and then they provide this partner Channel with all sorts of tools that the typical business owner isn't even aware of nor would they buy it themselves but these are tools that programmers can use and what Microsoft is doing is churning out aib based tools to help these programmers develop their own large language models and uh you know get them trained quicker and more efficient and all of that so no you can't really go to micros for that all right then Microsoft was a bad choice how about uh a big CRM company it would seem completely logical that someone who already has a bunch of your data would take this next step another great point but CRM is CRM we're talking about manufacturing now and the data is not just in the CRM system I mean this data is in all sorts I know but it's a start it's a start they've already got that the CRM companies are busy doing their CRM stuff you know what I mean so you know they can't do it all and the the thing is in the manufacturing World other than the Giants like the saps and the oracles you know that like for big companies where again they're the ones working side by side with these big companies that develop inous applications you know like any industry the industry applications are are uh vendors are somewhat fragmented you know I mean there's no there's no like one leader of manufacturing software there's a handful um of good ones but they're not giant companies they're nowhere near the size of a Microsoft or you know or even you know you a Google or anything like that so they're you know their resource challenged as well and a lot of them are turning to startups um and looking to license or buy applications from them that can help them get to the same results but it still gets back to the startups that are working on them and it's why um this huge amount of VC money I mean the the majority of VC money in the past 12 months has been going towards AI based startups and if you spend you know spend a half an hour on em mergence capitals website for example they're one of the VCS that invest heavily in um you know in in you know technology startups you'll see they're all aib based and they're developing applications like this so uh when will you tell me that one of your many clients has actually adopted one of the things you refer to in this column when how soon it'll be will that three to four years at the minimum oh really okay yeah at the minimum it really would I think of somebody like a Paul DS you know um who you know he's he's a manufacturer you know what I mean and Y at at his company and he clearly you know isn't going to develop something like this in the house I mean it's a giant undertaking to do and that's not his specialty you know so the question is when will the niche Manufacturing software that he uses for the furniture manufacturing industry when are they going to make some of these tools available I mean gez you know they again they have to involve so many other when is he going to be able to hire one of those humanoids you were telling us about but even the humanoids that we talk about that you know and and the ones that can do development work they all do need supervision and management as well you know um I think that Paul though and I'm just I'm picking on Paul for a little bit because I admire him so much but I think that um the the humanoid robots getting back to that in his place of business uh that can maybe act as an autonomous forklift or an autonomous carrier or an autonomous assembler that's not so far off but I'll still go two to three years for something like that um the cost of those robots will have to come down and then they have to be trained so it's it's sort of a big thing I think in two to three years those robots will be at a price where uh smaller companies like Paul's will be still on the bleeding edge like playing around with them and they still won't be completely proven and reliable and in the end they might be uh you know not worth the time because they're not mature enough um but after that I you know we just got to be patient and give it some time and I do think that Paul's company will look a lot different 10 years from now um if he hasn't jumped out the window by then all right so what uh what can we look for from you this week what are you working on well I do um I I I want to write um um a piece that will be coming out about why Wall Street people are backing Amma Harris and I think that um you will you'll enjoy it because it is um you there's some really valid reasons why somebody from Wall Street would would back har so that that that's a piece that final touches are being put on and something that will be um available soon and then I've got all sorts of things I I need to write for the inquire um that I I haven't decided on what the best one is but I think I want to focus on um health benefit and what companies are doing to um you know what what new things companies are doing in 2024 to offer competitive but affordable health care you know so those are my things I'm working on you've had a lot of interest in that in past years um and and you've mentioned some stuff in the past is there something brand new that you're focused on already that you're going to tell us about yeah as a matter of fact that you bring that up it the more and more companies are self- insuring Lauren they they are and small businesses and more and more companies are gravitating towards um cap captive insurance companies um and captive insurance companies are um you know it's a way for small businesses to join up together um in a self-insuring model and it's proven that if it's managed the right way it can really save you on your health costs that's pretty new you know a few years ago it was a big company game and now it's becoming more of a smaller company um benefit so that's that's something I'm GNA be mentioning when do those packets uh head out that every business gets with their their new rates are we how close are we to that like in the fall right yeah and it's all just theater you know you get all these things and it's all like Independence Blue Cross says they're going to I mean health insurance rate is supposed to go up like nine to 10 percent this year you know so again after like an eight to nine percent increase last year hey almost all insurance is going up at least nine or 10% right you're right auto insurance and property insurance as well it's really you know it's rough and health insurance well like Auto and property insurance I mean it's it's a required cost you have to offer health insurance and once again it's becoming a big issue and um you know it's you know it's a problem but you know I want to at least share what employers are doing to to try and navigate their way around sure hsas also are more popular than ever that's another one that I'll mention so we have talked about that before but I I look forward to talking about it again this stuff never gets well it's always I don't know if it ever it's always old or it never gets old but it's always important I agree I agree Jean Marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times the Chicago Daily Herald Forbes and entrepreneur you can also hear him on ABC radio's ey on the world with John Bachelor Jean hosts two small business podcasts with paychecks Corporation and the Hartford this episode was brought to you by the great game of business which helps businesses use an open book management system to help build healthier companies you can learn more atre game.com 21 hats thank you Jean thank you Lauren we'll see you soon have a great week everybody