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Tip Credit: Do The Math, If You Can

Every once in a while, legislators are abstract to the point of being comical. Our Legislature’s latest effort to pass a proposal to raise the minimum wage hit a few political potholes.

Those “potholes” came in the form of the House of Representatives’ suggestion that the proposal be passed, but more slowly than the state Senate had recommended. They approved the bill unanimously and sent it to the House Finance Committee before a final House vote. If it clears Finance, it would be sent to the governor’s desk for his signature or veto.

Of course, he’s not going to veto the proposal in an election year, so what’s the plan to slow down the raising of the minimum wage bill?

According to the Honolulu Star-Advertiser, supporters of the hike say Hawaii Restaurant Association asked the committee to take a more gradual approach to raising the minimum wage.

Jack Temple, policy analyst for National Employment Law Project, said after the hearing, “This is what the president is calling for and what Congress has been dragging its feet on. This is good news for workers.”

Raising the minimum wage to $10.10 an hour is no longer the big issue. At issue for the committee is that they also voted to change the tip credit, which under current law allows employers to pay workers $7 an hour instead of $7.25 if they earn at least 25 cents per hour in tips.

This is where it got comical. A suggestion was made by the House Labor Committee to change the way the tip credit is calculated, using a recommendation from the state Department of Labor and Industrial Relations. It goes something like this: The tip credit would be eliminated for workers who earn less than 250 percent of the poverty line, following federal guidelines for the state of Hawaii. If you are an employer, the federal poverty level for a single person in the state of Hawaii is $13,420 per year in 2014, according to the U.S. Department of Health and Human Services.

Now for some arithmetic. For those earning more than 250 percent of the poverty level, the tip credit would increase by 25 cents per hour each year to reach $1 per hour in 2018.

Janet Mason of the League of Women Voters had the quote of the hearing when she said, “It will be challenging for employers to calculate the tip credit fairly.”

That’s if they have the time to calculate it in the first place.

With no disrespect to employers, they probably would be better off outsourcing the arithmetic necessary to comply with the new law.