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AUGUSTA — Senator Roger Katz, R-Kennebec, has sponsored a bill that would restore the full tip credit for restaurant owners, which was reduced with the passage of the minimum wage referendum in November’s election.
L.D. 673, which has co-sponsors from parties, would reinstate the credit to what it was before the law passed — 50 percent of the minimum wage. The credit allows employers to deduct a certain amount from a tip-making employee’s hourly wage, as long as tips make up the difference in meeting Maine’s minimum wage. Under the referendum passed in November — Question 4 — that deduction for employers decreases as the minimum wage in the state rises. Last year, the minimum wage for service industry workers was $3.75 An hour and the state minimum wage was $7.50. This year, service industry workers’ minimum wage is $5 an hour and the state minimum wage is $9. The gap closes more each year. In 2020, the state minimum wage will be $12 under the law, and service industry workers’ minimum wage will be $12 in 2024.
Katz said the new law has spurred many customers to tip less, meaning lower pay for those restaurant workers whose tips previously brought their pay above minimum wage even after the employer took the tip credit. He said it has also caused financial hardship for restaurant owners, who have to pay waitstaff more.
“Of all the things going on in Augusta, the tip credit is one of the issues that I’ve heard the most about from constituents and restaurant owners in my district,” said Katz in a news release from the Maine Senate Republicans Office. “That’s because this new law fundamentally changed the server-customer dynamic in restaurants all across Maine and is already causing some significant misunderstandings. Proponents of this provision sold it to the voters as a way to increase wages for these individuals, but it has actually decreased wages in many cases, as customers have begun to tip less, resulting in a much lower hourly wage.
“The elimination of the tip credit is also detrimental to restaurant owners, who already operate on razor thin margins. It is already forcing them to raise prices, reduce hours, eliminate benefits, reduce pay for back-of-the-house staff, switch to a computerized business model, eliminate positions or take a significant hit.
“Many Mainers have earned a very decent wage working in restaurants and bars for tips which are often times significantly higher than the minimum wage,” Katz said. “But this new policy threatens that, hurts our businesses and will result in higher menu prices and a lower quality in service for the consumer.”
Aside from reducing the tip credit, the new minimum wage law also incrementally raises the minimum wage until it reaches $12 an hour in 2020 and indexes the minimum wage to inflation.
