U.S. Rep. Rick Allen, R-Georgia 12th District, visited Dolan’s Bar-B-Q in Statesboro at the start of the lunch rush Thursday, Aug. 21, where he talked with restaurant owner Mary Beth Paulk about the “no tax on tips” and “no tax on overtime” provisions of the One Big Beautiful Bill Act.

Paulk and Allen had about a half-hour conversation while seated together just out of earshot of the two reporters present. The Statesboro Herald then interviewed Paulk for a couple of minutes while Allen, after speaking to employees at the service counter and register, ducked into the kitchen for a moment to meet more of the staff. He then spoke briefly to reporters outside the restaurant. 

Paulk said she told Allen she hopes the “no tax on tips” and “no tax on overtime” provisions can help her hold onto more long-term employees in this university town.

“Like I told him, I’m just hoping that it helps create more longevity or more long-term employees, because for our base employees we’re 95% college students, which is great and I love their youth and enthusiasm, but we would like some people that are willing to stay longer and become more permanent employees,” she said.

The role that tips play in the compensation of restaurant wait staff is obvious. Overtime also becomes  a factor for both front- and back-of-house employees of Dolan’s at certain seasons.

“During the summer it’s not, but during busy times like football season, we give out a lot of overtime because we’re just so crazy busy. …,” said Paulk. “We do a lot of catering during football season, and so that helps give them a lot of opportunity to get more hours, overtime and such.”

Paulk is sole owner of Dolan’s, but the restaurant houses, behind its own separate counter, Honey Specialties, the business owned and operated by her sister, Lazar Oglesby, selling cheesecake and other sweet items.

What “no tax on overtime” will mean isn’t as simple as it sounds, as will be explained below.  The “no tax on tips” provision comes closer to meaning what its name suggests, but there are also limits, unlikely to be reached by wait staff at a Statesboro restaurant.

One Big Beautiful – really?

“One Big Beautiful Bill Act” is the headline name given in the online index at www.congress.gov for what was otherwise House Resolution 1 of the 119th Congress. This massive, complex tax and spending policy legislation was passed by the House and Senate from late May to early July and signed into law by President Donald Trump on July 4.

Allen, in speaking to the one Herald reporter and one WTOC Television reporter on the curb at Dolan’s, referred to it as legislation developed in the House of Representatives .

“Small business employs 50%  of the American people. It also is responsible for hiring about 75% of new  employees in economic  expansions,” Allen said.  “What we promised the American  people we were going to do is we were going to go out to all  our small businesses, find out why they’re  not growing, why they’re  not hiring – we’ve got 10 million job openings in this country right  now – but why they aren’t hiring more people, and if they had vacancies why are people not applying.”

Members of the House in the past year “have studied every area of this economy, and we have put forth in the new Big Beautiful Bill something that addresses these issues, and a lot of them are post-COVID issues on the employment side, and we need to get back where we need to be,” he said. “We need to do immigration reform in the country and we need to get people who are on safety-net programs out there to go to work.”

‘No tax on tips’

Allen said the “no tax on tips” provision is “worth $1,300 more a year” in taxes saved to someone who works in part for tips. In response to a follow-up question, he said this is a kind of average based on “the amount of money people receive total in tips.”

He went on to refer to someone who was born after 1982 as having “never seen inflation in her lifetime … until four years ago.”
“Policies of that administration reignited inflation in this country,” Allen said. “That’s democratic socialism, and that’s exactly what this country doesn’t need. People can’t afford it.”

Of course that was President Joe Biden’s term, but he didn’t refer to Biden by name. He referred to the economy “just six years ago” – during Trump’s first term and also without naming him – as “the best economy in our lifetime.”

Whatever the reality of the economy four or six years ago, the Big Beautiful Bill changes some things that had been the case long before Biden’s presidency or Trump’s first presidency. One is that tips and overtime pay have as long as anyone remembers been subject to the federal income tax to the same extent as regular wages.

Allen said the no tax on tips provision amounts to no longer considering tips as “earned income.” Asked if he has concerns that some employers or employees may “game the system” by trying to count some pay as tips that isn’t really tips, he said they would have “to  answer to the IRS for that.”

“I mean, earned income is taxed, and …  you can’t work tips-only. So ‘gaming the system,’ (you say), ‘Hey, I want to go up and work in the restaurant but I don’t want any earned income, I want tips only.’ You can’t do that. You’ve got to pay minimum wage.”

Incidentally, Georgia allows a lower cash minimum wage, $2.13 an hour with a “tip credit” of $5.12 an hour (also the federal baseline) for tipped jobs, instead of the federal minimum wage that applies to most jobs, $7.25 an hour.

According to a July 20 explanatory article in the financial magazine Forbes, available at www.forbes.com, the provision does not eliminate tips from having to be reported in tax returns and is not an exemption, but a deduction. However, it is a deduction up to a maximum of $25,000 tip income only for taxpayers in work for which people “customarily receive tips.”

Overtime deduction

As also seen in reports in Forbes and the Associated Press, the “no tax on overtime” provision is also a deduction. As Allen also acknowledged, what can be deducted is not the entirety of pay for every hour of overtime, but the added 50% of “time and a half” pay.

So, for example, when time and a half (in other words the 1.5 multiplier) on a $16 regular wage amounts to $24 an hour, the worker will still be liable for tax on the $16 but can deduct the additional $8.