Culinary union rallies in Las Vegas against rising tip taxes

Local culinary and bartender union workers rallied outside the Foley Federal Building in downtown Las Vegas on Thursday to urge the IRS to lower a tax method for tipped workers that they say had been unfairly hiked without coordinating with organized labor.

The IRS lowered the tip allocation rate — which estimates how much a tipped employee typically makes in a shift, and therefore at what rate they should be taxed — in 2020 and 2021 because of the pandemic. But it once again raised the rates at the beginning of 2022, in some cases higher than pre-pandemic levels, the unions said.

“These are good jobs,” said Ted Pappageorge, secretary-treasurer of the Culinary Local 226. “These people are making a decent living, but these are average working-class jobs that the IRS is going after them instead of going after the biggest corporations and billionaires out there.”

The IRS had not responded to a request for comment by publication time.

Tip allocation rates vary by property, position and venue inside a resort. The IRS recommends that employers determine allocated tips based on factors like reported tip income, a percentage of gross receipts or other factors. The hikes, union workers say, can lead to a deep cut in take-home pay and even a zero-balanced paycheck for some.

Julie Wolfe, a cocktail server at Boulder Station, said her new allocation rate is $24 hourly.

“If I make $130 a day, guess what? I’m still taxed on $196,” said Wolfe, who has worked at the Boulder Highway casino for 21 years. “They’re not coming in here to visit like they used to, so it’s a big dip. (The IRS is) not hearing this. We’re not getting our voice out there. We’re here to say to the IRS, ‘We need you to sit down with us.’ ”

Several servers at Ruth’s Chris Steak House in Harrah’s were at the downtown Las Vegas rally because their tip allocation rate had risen from about $32 to $119 hourly, they said. It’s an overestimation of what they usually make in a shift and doesn’t account for working at off-peak hours of the day, a removal of automatic gratuity for large parties, pooled tips with other restaurant staff, and increasingly frequent stiffed tips from customers.

“There’s no way we make that much money. It’s, like, beyond our best day,” Jennifer O’Donnell said.

Rallygoers said it’s especially painful because inflation, high gas prices and housing costs have stretched paychecks even thinner. Meanwhile, casino resorts boast of a rapid comeback through record gaming winnings.

“Then, they brag every month. ‘Oh, we made over a million dollars,’ ” said Darcel DeSchambeau, a server at Ruth’s Chris. “Well, we’re getting zero.”

The unions are seeking a bargaining meeting or other opportunity to meet with the IRS and industry leaders, Pappageorge said. Nevada Sens. Catherine Cortez Masto and Jacky Rosen, both Democrats, sent a letter March 2 to the IRS to request a meeting with the Culinary union and for clarity on how the rate changes were determined and announced. The senators asked for a response by April 1. A spokesperson for Cortez Masto’s office confirmed they have not yet received a reply.

“What we want out of that is to toss out these new rates and go back to some kind of reduction,” Pappageorge said. “We know that maybe there needs to be less reduction, but we’re still in this pandemic and, economically, Vegas, we’re still struggling. So we need to have some kind of relief.”

McKenna Ross is a corps member with Report for America, a national service program that places journalists into local newsrooms. Contact her at mross@reviewjournal.com. Follow @mckenna_ross_ on Twitter.