New York City’s redesigned outdoor dining program is too expensive and too bureaucratic for many small, diverse, neighborhood establishments across the five boroughs to participate in. The result has been lost revenue for small businesses, reduced worker hours, job cuts, lower tax revenue, and fewer opportunities for people to dine outdoors in their own communities.
Now, instead of fixing these failures because it is the right thing to do, some government officials and groups have proposed a troubling new approach: conditioning access to an improved outdoor dining program on eliminating the restaurant tip credit.
Restaurants pay tipped workers a base wage that, when combined with gratuities, must meet or exceed the full minimum wage. The difference is known as the “tip credit.” Think of a waiter or bartender as a salesperson earning a base salary plus commission — but legally guaranteed the minimum wage, with the opportunity to earn much more in practice from tips.
Eliminating the tip credit would dramatically increase costs that many restaurants simply cannot afford. This proposal is not reform — it is exclusion by design, pushed by politicians who do not have to deal with the realities of running a restaurant on ever-thinner margins and many mandates.
The financial impact is not theoretical. Eliminating the tip credit in New York has been rejected repeatedly by small business owners, tipped workers, and policymakers because of its crushing cost — often exceeding $100,000 a year even for a small restaurant. For many neighborhood establishments already operating on razor-thin margins, that kind of increase would be devastating.
Other states and cities have learned this lesson the hard way. In recent years, blue states such as Massachusetts and Maine rejected efforts to eliminate the tip credit. Washington, D.C. just reversed course after beginning to phase it out, with the city’s progressive mayor and council voting to reinstate the tip credit after it caused chaos in the local restaurant industry. Restaurants closed, jobs were lost, workers earned less money, menu prices rose, and diners faced confusing surcharges that made eating out more expensive.
Both Mayor Mamdani and City Council members have said that high costs and red tape have deterred restaurant participation in outdoor dining, contributing to a drop from more than 13,000 establishments approved during the pandemic to what may be as few as 2,500 this spring. They have rightly stated that lowering regulatory costs is essential so more mom-and-pop restaurants can participate.
Yet this new campaign suggests that, for government to reduce outdoor dining costs — which can already run into the multiple tens of thousands of dollars — restaurants must agree to absorb hundreds of thousands of dollars more each year by eliminating the tip credit. This makes no sense. It will only further reduce the number of restaurants able to offer outdoor dining, cut worker hours, and reduce the income workers earn from those shifts.
Restaurants must not have to pay more simply to access a functional, equitable program that should already exist as a baseline. And workers should not earn less because their restaurant can’t afford a politically imposed cost increase. Good government reform should expand opportunity, not create new barriers.
It is also worth noting that the leading proponent for eliminating the tip credit has worked alongside a major fast-food corporation to push for its elimination — a system full-service restaurants rely on, but the fast-food chains do not use. Removing the tip credit would hurt sit-down restaurants while giving large fast-food companies a competitive advantage. Seen through that lens, policies that raise costs and limit access to outdoor dining risk making the program more accessible to billion-dollar fast-food chains than to a neighborhood taqueria or local café.
This proposal may be good for the digital screen you order from at a fast-food restaurant, but it is bad for the New York waiter or busser who depends on wages and tips at a local establishment.
Eliminating the restaurant tip credit is a bad policy on its own. Conditioning access to a workable outdoor dining program on its elimination will cause even greater harm to small businesses, workers, and neighborhoods. These are two separate policy issues, and they should be treated as such. If government truly wants to support restaurants and workers, it must preserve the tip credit while fixing outdoor dining.
Rigie is the executive director of the NYC Hospitality Alliance, representing thousands of restaurants, bars, and nightlife venues across all five boroughs of New York City.
