The internet got very, very mad at Mayor Mike Johnston on Thursday.
The reason: his supposed new plan to increase your restaurant bill by 20 percent.
As The Denver Gazette put it: “Denver Mayor Mike Johnston wants to add a 20% service charge to local restaurant tabs — and then tax it …”
Or as anchors with Channel 2 described it, “(he) wants to add a 20 percent service fee to each bill” and is proposing an “additional 20 percent ‘service tax’ at metro restaurants.”
That led to an explosion of comments on Reddit and elsewhere, many of them calling Johnston extraordinarily stupid. A lot of people believed that Johnston was planning to force a mandatory 20 percent surcharge on all local restaurants.
But Johnston’s office says that’s not true.
The mayor is only talking about making it financially easier for individual restaurants to voluntarily introduce service charges, spokesperson Jon Ewing said.
And instead of implementing any new government tax, Johnston instead was describing a potential way to reduce the tax burden for restaurants that do have service charges, Ewing said.
“A voluntary service fee — which restaurants often use to replace a traditional customer added tip - is merely one potential option that could help Denver restaurants and employees succeed, and I will keep working hard to find a commonsense solution that ensures wages stay high and businesses remain open,” Johnston said in a statement.
Here’s how Johnston initially introduced the idea on City Cast: “One idea we’ve been floating to restaurants is the idea of a service charge, which is, if you do a service charge of 20 percent, you can gather that and you can spread it equally across all the employees.”
Here’s how the mayor says his proposal actually works:
Some restaurants already use service charges, adding a certain cost to each bill — and then, usually, redistributing it among the staff. But when they do so, that money is basically taxed twice.
The service charge itself is taxed, forcing the customer to pay even more in sales tax. Later, the payout to the employee is also subject to income and payroll taxes paid by the business and worker. (By comparison, tips are only subject to income and payroll taxes, and workers may illegally avoid taxes altogether by not reporting cash tips.)
Johnston is interested in service charges as an alternative to tipping, and one that could lead to higher pay for back-of-house restaurant employees and managers.
On City Cast, Johnston suggested that the city could reduce the tax burden that is created when businesses voluntarily implement service charges — by returning some of the tax money to the restaurants.
“You could take the marginal new tax, and we could share that revenue back with the restaurants,” Johnston told City Cast.
His plan sounds like a credit that reduces taxes for using service charges.
“We’ll take some small additional revenue, but we could actually support the institution of the restaurant. At the same time, you’re supporting dollars back to the individuals,” he said.
Juan Padró, the influential local restaurant owner, told Denverite he had been talking to the mayor about service charges since the summer. He said Johnston was interested in encouraging restaurants to voluntarily use the model. The mayor had never mentioned a mandatory fee, nor had Padró heard any similar idea from anyone else.
“He never said anything about, ‘We’re gonna make you do this,’” Padró said in an interview. “I think one thing about him that I appreciated personally was that he understood the need for restaurants to be able to choose what worked best for them because they are so different.”
Massive blowback
Threads about Johnston’s service fee remarks drove hundreds of angry comments, many of them believing that he was trying to force it upon every restaurant.
“I think restaurants in the first ring suburban cities would love for Denver proper to institute this fee, that would definitely increase their business,” one Reddit commenter wrote.
“Is he saying all restaurants should charge 20% service charge and expect people to tip on top of that? Hell no. Mike Johnston sucks,” added another.
But some of the controversy was about the service charges model.
Some restaurant owners have said that service charges are a solution to disparities in restaurant pay.
Instead of allowing front-of-house waiters to collect all the tips, a service charge could reroute that money into a central fund that could then be divided up more evenly among all the staff. (This can also be done by pooling tips.)
But service charges have also drawn criticism from staff and customers.
For one thing, service charges usually mean fewer tips. Front-of-house employees could lose money as those tips are instead paid into the service charge and distributed to other workers — and potentially the restaurant’s owners and management. Staffers also complain about a lack of transparency about where the money is going.
Some customers also hate losing the option to choose how much extra to pay, or they may feel pressured to tip on top of the extra service charge.
What do you think? Let us know.
