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Tipping and the Mcquatters Formula

Author

Listed:
  • Alan Macnaughton

    (University of Waterloo)

  • Michael R. Veall

    (McMaster University)

Abstract

The Internal Revenue Service has been attempting to reduce tax evasion on tips paid in cash by imputing this income on the basis of credit card tip income. This note points out that the effective marginal tax rate on a credit card tip can as a result be very high, possibly in excess of 100%. This rate may affect behavior and could detract from the social acceptability of the imputation formula.

Suggested Citation

  • Alan Macnaughton & Michael R. Veall, 2001. "Tipping and the Mcquatters Formula," Public Finance Review, , vol. 29(2), pages 99-107, March.
    • Handle: RePEc:sae:pubfin:v:29:y:2001:i:2:p:99-107
    DOI: 10.1177/109114210102900201
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    References listed on IDEAS

    as
    1. Slemrod, Joel, 1998. "On Voluntary Compliance, Voluntary Taxes, and Social Capital," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(3), pages 485-491, September.
    2. Lynn, Michael & Zinkhan, George M & Harris, Judy, 1993. "Consumer Tipping: A Cross-Country Study," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(3), pages 478-488, December.
    3. Slemrod, Joel, 1998. "On Voluntary Compliance, Voluntary Taxes, and Social Capital," National Tax Journal, National Tax Association, vol. 51(n. 3), pages 485-91, September.
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    Cited by:

    1. Stefan Gössling & Sébastien Fernandez & Carlos Martin-Rios & Susana Pasamar Reyes & Valérie Fointiat & Rami K Isaac & Merete Lunde, 2020. "Current Issues in Tourism Restaurant tipping in Europe: a comparative assessment," Post-Print hal-02546589, HAL.
    2. John E. Anderson & Örn B. Bodvarsson, 2005. "Tax Evasion on Gratuities," Public Finance Review, , vol. 33(4), pages 466-487, July.

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