GOP candidate for governor Tom Emmer says Minn. restaurant servers’ tips shouldn’t be taxed

GOP candidate for Minn. governor: Don’t tax tips

ST. PAUL, Minn. — A week after igniting a firestorm over restaurant worker pay, Republican gubernatorial hopeful Tom Emmer on Tuesday proposed eliminating Minnesota income taxes on some tipped wages.

Emmer, who suggested last week that tips be factored into the hourly pay of minimum-wage workers, said tips shouldn’t go to the government. His campaign estimated that the plan would save eligible workers up to $17 million, which could widen an anticipated multibillion-dollar state budget deficit starting next year.

Without offering specifics, the three-term lawmaker said the proposal could fit within his plan to overhaul state government for major spending reductions.

“We don’t need to count in taxes generated off of servers’ tips,” he said, adding that the extra money “belongs to these people.”

Emmer has been doing damage control since suggesting that Minnesota enact a provision commonly called a tip credit, which can drive guaranteed hourly pay below the standard minimum wage. He has since issued several clarifications, set up a public forum Wednesday to soothe concerns of workers and spent a night waiting tables at a St. Paul restaurant.

The tip-credit provisions in most states — opponents call them tip penalties — allow businesses to pay workers less than the minimum wage if they earn tips.

Federal law allows states to drop the minimum wage for tipped employees to $2.13 per hour, although Emmer never said how he would fashion his credit. On Tuesday, he backed away from endorsing any specific plan.

In Minnesota, restaurant workers are entitled to the minimum wage along with tips. The state’s minimum wage is $5.25 for small employers and $6.15 for large employers, based on annual sales.

Emmer’s new plan would exempt from taxes the first $20,000 in tips that hospitality industry employees collect. He would also extend new tax breaks to restaurant owners on equipment and meals they give to workers.

His campaign said the proposal would save the workers as much as $17 million, but didn’t quantify the size of the other tax cuts. Minnesota’s next governor will confront the multibillion-dollar deficit out of the chute.

The state Department of Revenue wouldn’t confirm or refute the figures because not all tipped workers report their income in the same way, said agency spokeswoman Kit Borgman.

The plan was immediately criticized by Independence Party candidate Tom Horner, who said it would be unfair to allow workers from one industry to shield a substantial portion of their income from taxes.

“It’s a pandering response to a political crisis that he brought on himself,” Horner said.

Democratic candidates for governor seemed to agree.

“He keeps turning around and around and around to try to get out of the mess he’s created here for himself,” House Speaker Margaret Anderson Kelliher said. “In fact, I think he’s just spinning at this point.”

Former state Rep. Matt Entenza called Emmer’s plan a “gimmick.”

Emmer has all but sealed up the GOP nomination, facing only token opposition in an Aug. 10 primary. Still, the tip issue has put him on the defensive.

Emmer’s campaign didn’t give notice of his shift as a waiter over the weekend. But it released video footage late Monday showing him carrying drinks, filling chip baskets and serving platters at the Ol’ Mexico Restaurante in St. Paul.

In the video, Emmer accuses the media of misrepresenting his position, saying: “We’re not talking about reducing anyone’s wages.”

As a freshman legislator in 2005, Emmer introduced an amendment to repeal the state minimum wage. “This is a true form of socialism,” Emmer said at the time. “We need to allow the market to work.” But he withdrew the proposal before a vote.

Emmer’s critics doubted the new plan would work — or stem political damage.

“I wouldn’t vote for him if he gave me a $100,000 tip,” said Lissi Corbett, a waitress in St. Paul who joined Kelliher at an event Tuesday. Corbett is trying to build support among restaurant workers for Kelliher.

Kelliher has proposed increasing the minimum wage by $1.50, while Entenza and fellow Democratic gubernatorial candidate Mark Dayton, a former U.S. senator, also want to raise the minimum wage.

The Mexican restaurant where Emmer did his shift will host his forum. It’s owned by Republican donors, and one family member is recorded as having given to Emmer’s gubernatorial campaign. Emmer’s campaign has said the forum will be open to anyone.

Associated Press writer Martiga Lohn contributed to this report.