Tip of the Iceberg: How Much Do Tips Bunch at Reporting Thresholds?

Emek Basker, Lucia Foster and Martha Stinson

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: We study the importance of bunching in the context of tip-income reporting by workers at full-service, single-unit restaurants in the United States. Using tax reports at both the individual and the employer levels, we show that reported tip income varies with minimum-wage laws that provide an incentive for tipped workers to report some, but not necessarily all, of their tips. As a result, reported tips bunch at the minimum required threshold. We quantify missing tips due to bunching at nearly $63 million per year in 2018 dollars, on average over the period 2005-2018. Bunching is stronger for jobs at small employers and in the earlier part of the time series and declined monotonically from 2010 to 2018. Using restaurant-level revenue data, we also estimate the total value of unreported tips assuming an average tip rate of 12%. We find that tips are missing throughout the distribution. All told, missing tips exceed $4 billion per year, implying that bunching explains only 1.5% of all missing tips.

Keywords: Tipping; Restaurants; Tip Reporting; Bunching; Minimum Wage; Tip Credit (search for similar items in EconPapers)
JEL-codes: H26 J33 L82 (search for similar items in EconPapers)
Date: 2026-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-40.pdf First version, 2026 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:26-40

Access Statistics for this paper

More papers in Working Papers from U.S. Census Bureau, Center for Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dawn Anderson ().