“Employees across Maryland, including last fall in Montgomery County, turned out in droves to oppose tip credit elimination legislation after seeing this harmful experiment play out in neighboring Washington, D.C. State and county lawmakers should continue to listen to the concerns of local restaurant employees to avoid the job-killing, tip-slashing consequences of any future proposals to eliminate tip credits.”

Background:

Economists and employees alike reject this policy as a way to help tipped restaurant employees. Research indicates that eliminating tip credits causes earnings and job losses for restaurant employees, and forces businesses to shut down. Substantial research finds:

• Every $1 increase in the tipped minimum wage causes 6.1% job loss for tipped restaurant employees;

• Eliminating Montgomery County’s tip credit could cost thousands of employees their jobs;

• For families of tipped employees, tip credit elimination could cost them up to $8,000 a year in household earnings;

• As tipped minimum wages are increased, tipping percentages decline. Jurisdictions that have already eliminated the tip credit have some of the lowest tipping percentages in the country.

• Since the last hearing on October 2023, D.C. experienced the anniversary of Initiative 82’s passage – where restaurants are already experiencing stagnating restaurant employment growth, servers are losing tips, and restaurants are closing down at a higher rate than years past as a result of tip credit elimination.

Last year, Maryland tipped employees testified before state Senators, urging them to reject a statewide proposal to eliminate the tip credit and protect their tips instead. Neighboring Prince George’s County also tabled the proposal after hearing tipped employees testify. To read more about how the tip credit works and why employees are fighting to preserve it, see EPI’s tip credit primer here.