Am I being tricked into overtipping when I eat out? Should I tip before tax?

Dear Quentin,

I’ve read your previous responses to letters on tipping, and my thoughts are simple: Tipping is dependent on the service given. I won’t tip at a deli counter, but I will tip more in a diner. I see no reason to tip a deli counter person on a regular basis. The person who rings up my groceries isn’t allowed to accept tips, and they do a lot more than put a sandwich in a bag.

As far as restaurants go, 15% is the starting point and I will go up from that as warranted. I do tend to tip a high percentage in diners. The waitstaff there are generally fabulous, deal with lower price points and a varied clientele. I feel they also suffer from customer bias where some people seem to think it’s only a diner not a fancy restaurant.

‘Helping others is not always through money. I volunteer my time with several charities and donate blood.’

The job is the same whether my meal is $10 or $100. I try to pay in cash to ensure the waitstaff is promptly getting their tip, and to ensure that the money does indeed go to the wait staff. Are we expected to tip on a total that includes credit-card charges? What’s more, helping others is not always through money. I volunteer my time with several charities and donate blood.

What troubles me is that throughout the New York City metro area, tipping recommendations in restaurants are based on faulty calculations. My friends and I all agree that tips are supposed to be based on the price of the meal — that is the subtotal or pre-tax figure. Restaurants frequently encourage people to tip on the final amount. 

A Fair Tipper

Related: I’m sick and tired of tipping 20% every time I eat out. Is it ever OK to tip less? Or am I a cheapskate? 

Dear Fair,

Yes, yes, yes, and yes. 

Yes, wait staff in diners work as hard as any restaurant worker, and they deserve whatever your optimum tip — 15% or 20% — and as much as you would tip in a white-tablecloth restaurant. Yes, consumers should not be expected to tip in a deli — unless you have a good relationship with the staff, and you tip occasionally for goodwill. If you choose to “skip” the charity donation in a pharmacy, that’s OK too. Yes, donations and tips are increasingly being conflated, and that’s not always a good thing. We should be comfortable with the charity and 100% sure that the donation is going to the charity in question. 

And your main point: Yes, tipping on the subtotal before tax and before credit-card charges is absolutely fair, although a lot of people — especially when calculating the tip among friends — tip on the after-tax total. Why? Perhaps we don’t want to be seen splitting hairs over the tax among friends and/or in front of a service worker who has given us exemplary service. Calculating tips is often done under pressure, and no one likes to be seen as a cheapskate. I almost always tip on the total amount, knowing that the sales tax is included, primarily because I figure that extra $1 or more is going to the person who served my table.

My colleague, MarketWatch news editor Nicole Pesce, put together a guide for how much you should tip everyone, and who you should NOT tip. She also cited three reasons why tipping has become such a note of contention, and why it appears we are tipping more: people tipped staff more during the pandemic (they were, after all, putting their health and lives at risk with their jobs); 40-year high inflation over the last 12 months has increased the cost of everything and, as such our tips rose in tandem with prices; and, finally, digital tipping appears to be ubiquitous, and people have been suffering from tipping fatigue. 

‘You’re not the only one: Americans are souring on tipping.’

You’re not the only one with tipping fatigue, though: Americans are generally souring on tipping. A large majority (66%) of U.S. adults have a negative view about tipping, according to a poll released by the personal-finance site Bankrate last month. The bottom line: consumers feel they are being forced to compensate employees for low pay (41%) and they don’t appreciate all that digital guilt tipping (32%) and, as a result, they believe that tipping culture has gotten out of control (30%). Respondents also said they were confused about how much to tip (15%), but a small minority (a paltry 16%) said they would be willing to pay higher prices in lieu of tipping.

People appear to be less generous with their tipping amounts, and they also appear to be tipping less often. What’s perhaps most surprising from Bankrate’s research is that only 65% of diners actually tip when they eat out (that’s down from 73% last year). After restaurants, people are most likely to tip barbers/hairdressers (53% of those polled) and food-delivery workers (50%). From thereon, only a minority of people say they tip taxi or rideshare drivers (New York City cabs, which give tipping options upon payment, may be an outlier here), hotel housekeepers, baristas and food-delivery workers.

It’s important that we have this conversation about tipping because expectations and digital tipping methods are evolving all the time. On the one hand, people are facing higher prices and they are understandably feeling under pressure to tip. On the other hand, this conversation naturally overlaps with the working conditions and pay of service workers. Americans are tipping less than they did during the worst days of the pandemic. Service workers — along with medical personnel, bus and train drivers and first responders — were among the heroes of the pandemic. That is something I hope we never forget.

“The person who rings up my groceries isn’t allowed to accept tips, and they do a lot more than put a sandwich in a bag,” the letter writer says.

MarketWatch illustration

Also read:

‘I respect every profession equally, but I feel like so many people look down on me for being a waitress’: Americans are tipping less. Should we step up to the plate? 

‘We’re very upset!’ We gave a friend $400 concert tickets and $2,000 Rangers seats, but weren’t invited to his wedding. Do we speak up?

‘All of these tips add up’: If a restaurant adds a 20% tip, am I obliged to pay? Should tipping not be optional? 

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