Washington D.C. – The District of Columbia Council has significantly altered Initiative 82, the voter-approved measure aimed at gradually eliminating the tipped minimum wage, prompting questions about its impact on restaurant service fees and potential federal tax changes on tips. A recent tweet by journalist Jessica Sidman highlighted these evolving dynamics, asking, "> What happens with service fees now? What changes to Initiative 82 and the DC tipped wage—and also "no tax on tips"—might mean for dining out."
Initiative 82, passed by D.C. voters in November 2022, originally mandated that the tipped minimum wage would incrementally rise to match the city's standard minimum wage by 2027. Its implementation began in May 2023, with the tipped wage increasing from $5.35 to $6.00, then to $8.00 in July 2023, and $10.00 in July 2024. Proponents argued it would provide more stable and equitable wages for tipped workers, who traditionally earn a lower base pay supplemented by tips.
However, the initiative faced considerable backlash from many in the restaurant industry, who cited rising labor costs, decreased customer foot traffic, and a surge in restaurant closures. Businesses responded by implementing service fees to offset increased expenses, leading to concerns from workers about diminished tips and confusion among diners. The Restaurant Association of Metropolitan Washington (RAMW) actively lobbied for a full repeal, arguing that the system was unsustainable.
In a pivotal vote, the D.C. Council moved to amend Initiative 82, settling on a compromise rather than a full repeal. This new measure preserves the tipped minimum wage, stretching out base wage hikes over the next decade. The tipped wage will remain at $10 per hour until July 2026, then increase every two years, eventually capping at 75% of the city's minimum wage by 2034.
This legislative shift also comes amidst discussions about a potential federal "no tax on tips" provision, which was reportedly under consideration in a federal budget reconciliation bill. Such a federal change could further influence the financial landscape for tipped workers and the restaurant industry. The D.C. Council's amendment also aims to increase wage transparency, requiring pay stubs to list all sources of income, including tips, bonuses, and service charges, starting in 2026. The ongoing debate highlights the complex balance between ensuring fair wages for workers and supporting the economic viability of the city's hospitality sector.