Doug Wheeler: Time to trim the tax burden for Florida salons, barbershops

Image displaying row of barber shop chairs

According to a recent study, the Sunshine State is home to the nation’s highest percentage of small businesses.

An incredible 64% of our companies have less than five employees, many of whom rely on customer tips to support their families. This is especially true for hair stylists, barbers, and nail technicians.

In Florida, these small businesses, owned nearly 50% by women and nearly a third by minorities, employ more than 31,000 people. These businesses create jobs in our communities and have become vital parts of our lives through the loyalty many feel to their hair stylist or barbers. But when it comes to tax treatment on their tips, they have been unfairly left behind.

Over 30 years ago, Congress provided a reimbursement tax credit to restaurants and bars, which effectively cancels out the taxes they must pay on their employees’ tips. On good days, this tax relief has enabled many of our local food service establishments to grow and thrive. On bad days, such as during the thick of the COVID-19 pandemic, it represents the only thing keeping many of them solvent.

This has been an example of good public policy. That is why small business-friendly members of Congress are asking a fair question: what about barbers, salons, and spas? These businesses bear the same financial burdens as restaurants and rely on tips just as much as food establishments. Don’t they deserve the same tax benefits that Florida’s restaurants and bars currently have?

Congress is considering a proposal to ensure that the tax system allows Florida’s small businesses to operate just as freely and effectively as its workers. Measures such as this would correct current tax law oversight that has hurt Florida more than most other states.

Florida has a sizable beauty services industry fueled by its sunny landscape and many picture-perfect settings. The businesses that make this key industry hum deserve serious consideration of proposals that will bring them tax relief.

Settling for anything less would represent the equivalent of dealing with Florida’s economy on the short end of the stick. And that would be a shame because, under the leadership of Gov. Ron DeSantis, Florida has made ensuring tax fairness a cornerstone of its current economic agenda.

By lowering tax burdens and creating more equality in tax treatment across the board, Florida has become the second most moved-to state in the nation. That said, federal barriers like the government’s unequal tip taxation system prevent some Americans from having the cash required to move their businesses to our great state.

Current congressional proposals to address this issue are based on the understanding that when small businesses succeed, the entire community benefits. By putting more money in the pockets of both employees and employers, policymakers have the opportunity to create stronger local economies, increase overall employment, and present more avenues for upward economic mobility throughout the state.

By championing legislative proposals that prioritize fairness and encourage entrepreneurship, congressional leaders can ensure that Florida remains a top destination for small businesses, workers, and residents alike. And that’s something we all should be able to support.

___

Doug Wheeler is the director of the George Gibbs Center for Economic Prosperity at The James Madison Institute.