Staffing
Tal Clark, CEO of Instant Financial, discusses findings from a survey revealing workers’ opinions on eliminating taxes on tips.
Photo: Adobe
June 17, 2025 by Tal Clark — CEO, Instant Financial
If you want to understand the potential impact of the proposed No Tax on Tips policy, don’t start with politicians or economists. Ask the people who actually earn tips for a living — servers, bartenders, bussers, and delivery drivers — many of whom work for restaurants across America and are part of the 65% of Americans who are living paycheck to paycheck.
In June 2025, Instant Financial surveyed 571 hourly workers who use its app for early access to wages and digital tips. The majority of respondents work in food service or hospitality environments. What they told us is clear: tips aren’t just a bonus — they’re a lifeline. As a result, eliminating taxes on tips, for those who meet the income threshold to pay taxes, could have a major impact on their ability to keep up with inflation, cover household expenses and avoid financial instability.
83% of tipped workers support the policy
While pundits debate the merits of removing taxes from tip income, those earning the tips have already reached a verdict. According to the survey, 83% of frontline workers said they support a No Tax on Tips policy, with just 4% opposed and 12% unsure or indifferent. The support was even stronger among restaurant employees.
This level of consensus is rare — and it reflects just how high the stakes are for the people serving meals, clearing tables, and working double shifts to make ends meet.
Tips are not extra; they’re essential
Tipped income is not just disposable or “nice to have.” Our survey revealed that the vast majority of workers use their tips and on-demand wages for basic living expenses.
More than 80% of respondents said they rely on these earnings to pay for essentials like rent, groceries, utilities, transportation, and gas. A smaller but meaningful portion use the funds for savings (20%) or to pay down debt (10%). In other words, these earnings aren’t going toward luxury purchases — they’re keeping the lights on, gas in the car and food on the table.
For many hourly workers, tips bridge the gap between a base wage and a livable income. For those workers who qualify to pay taxes, removing taxes on tips would increase take-home pay — money that would go right back into the economy through household spending.
Low, volatile wages are the norm
The survey also highlighted just how precarious income can be for frontline workers. While respondents reported a broad range of weekly earnings, the average weekly take-home pay was $465, and the median was just $400.
That amount leaves little margin for error — and even less for surprise expenses like a medical bill or car repair. Roughly one in five respondents earned under $300 per week. For many, the unpredictability of shift-based work and fluctuating tip income makes budgeting nearly impossible. Numerous participants emphasized that their income “fluctuates,” “depends,” or “varies daily.” These weren’t outliers — they were the norm.
On-demand pay isn’t just a perk
One of the most revealing findings was just how important early access to wages and tips has become amongst hourly workers. When asked how important it is to access their earnings before payday, 70% of workers said they would be financially unstable without it.
This points to a larger truth about the nature of hourly work today: the traditional biweekly pay cycle simply doesn’t match the financial realities of many employees. Rent, utilities, and grocery bills don’t wait — and neither should access to earned wages.
Restaurant employers that offer on-demand pay and digital tipping are increasingly seeing this not just as a benefit, but as a recruiting and retention tool. And if a No Tax on Tips policy becomes law, the value of those immediate earnings would only grow.
Inflation is making things worse
Another driver of support for tax-free tips is the broader economic landscape. A full 70% of survey respondents said they are concerned about tariffs and the rising costs of living due to inflation. In that context, even small boosts in take-home pay can make a real difference.
Tipped workers aren’t shielded from inflation. They’re on the front lines of it — buying everyday essentials, paying rent, paying medical bills and commuting just like everyone else. The difference is that their income is often inconsistent and dependent on external factors like weather, staffing, and customer volume, which means that a big spike in inflation, or conversely take-home pay, can have an outsized impact.
Workers want flexibility and choice
The survey also asked how workers prefer to receive their wages. While 63% chose direct deposit, nearly 37% favored new and alternative methods — including paycards, cash, checks, digital wallets, and virtual cards. The takeaway: frontline employees value choice.
Workers clearly want more control over what they earn — not just how they receive it, but how much they actually get to keep. Removing federal income taxes on tips would give tipped workers more autonomy and financial breathing room.
What this means for restaurant operators
For employers in the fast casual and QSR industries, the message is clear: your employees are affected by this debate, and they see meaningful opportunity in the No Tax on Tips proposal.
It remains to be seen whether the No Tax on Tips policy will be enacted, but the insights from this survey underscore the importance of offering flexible pay options, enabling digital tips, and supporting policies that strengthen take-home pay. These aren’t just worker benefits — they’re business advantages in a competitive labor market that can aid your recruitment and retention efforts both now and in the long term.
In an industry known for razor-thin margins and high turnover, listening to your workforce and advocating for their financial well-being could be one of the smartest moves you make.
About Tal Clark
Tal Clark is the CEO of Instant Financial, the fintech company modernizing payments and earned wage access for employees. With over 30 years of experience in financial services, payments, and payroll innovation, Tal has led transformative initiatives at companies like First Data (now Fiserv) and was part of the founding team of Money Network, the first platform to introduce electronic pay solutions for all employees. As a former U.S. Marine Corps Captain and helicopter pilot, Tal holds an MBA from the University of San Francisco and a BS from Mississippi State University.
