Round Up Service Charge Tax Credit Incentive
A round up service charge is a charge in the amount of the difference between a customer's total and the next dollar. For example, if a customer's total is $44.68 the customer would pay $45. The service charge of $.32 would be distributed to the employees working at the location at the time of purchase.
The service charge will substantially increase the wages of people who work in high volume transaction industries(1) like retail and fast food. We've estimated a full time Walmart store associate would earn about $6.25(2) more per hour if Walmart implemented a RUSC.(3) Many workers would likely earn more since the amount a person earns from RUSC is determined by the number of transactions per employee on site. If a gas station attendant averages 30 transactions per hour he or she would earn about $15 more per hour. In addition to RUSC increasing income for people in retail and fast fast food, other companies who hire unskilled workers will have to pay more to compete for labor.
As RUSC increases the wages of employees in HVTIs, employers will have to pay more payroll tax. No company is going to implement a program that will cost them money, but fortunately as wages increase more money is paid from an employee in federal income tax than an employer will pay in additional payroll tax. This means additional income tax collected can be used to eliminate the cost to the company created through RUSC improving wages. It also means we can afford to incentivize companies to implement the program.
The average wage for a Walmart worker is $12 per hour.(5) This is $24,960 annually. Adding 6.25 per hour through RUSC produces an annual income of $37,960.(6)
$24,960 pays $1236 federal income tax.
$24,960 pays $1910 payroll tax (7)
$37,960 pays $2796 in federal income tax
$37,960 pays $2904 in payroll tax. (8)
Payroll tax increases $996
Income tax increases by $1560 (9)
The additional payroll tax expense for RUSC is $996 for the employer
The additional income tax from RUSC income is $1560. RUSCTCI provides the employer a 100 percent payroll tax refund for RUSC earnings that is paid for through the additional income tax collected.
There is $564 of newly generated income tax leftover per employee. We've covered employer expenses but most businesses are not going to implement something new just to break even. RUSCTCI provides companies with 50% of the increased revenue. The public keeps half and the company is given a tax credit for the other half. In essence, people employed in HVTIs are buying higher wages for themselves and unskilled workers from industry and the public. Government and industry create the RUSC mechanism that produces the additional income for workers, that produces additional tax revenue, and they split the profit of their investment.
Walmart employs 1.6 million store associates(11) and would receive $287 per associate. $459 million dollars total annually, and the public would receive $459 million dollars in additional tax revenue from Walmart implementing RUSC. While 459 million in additional tax revenue is not significant in its own right, this is one company among retailers, and retail is one industry among many who would be considered HVTI and implement a RUSC. Not to mention additional taxable income generated in other industries who hire unskilled workers as an effect of RUSC on the labor market for unskilled workers. The increase in tax revenue overall should be substantial.
It's fair to criticize my sources for 9000 transactions per day and the 90 employees working over a 16 hour day. But it doesn't matter what the actual values are, because 1: the employees will make more money, and two, the federal income tax collected will be greater than the additional payroll tax collected, meaning the company and the public will always make more money. These 3 results are guaranteed through RUSCTCI.
As wages increase for people who work in retail and fast food, as well as for unskilled workers, the number of workers who rely on government benefits will decrease which will lead to a dramatic decrease in government spending. A less prominent decrease may occur from decreased demand for coin currency meaning we'll save money on the amount of new coins that need to be minted each year.(12)
There is one qualifier for a business to receive the RUSC payroll refund and the 50% tax credit for implementing a RUSC program. The company must maintain 100 percent of base wages prior to RUSC, and must maintain wages equal to 90 percent of pre RUSC wages every 3 years adjusted for inflation. Labor markets decide wages. Walmart averages about $12 per hour for store associates because on average that is what people are willing to work for to do that job. (Varying by area of course to produce that average). If Walmart implemented RUSC and employees earn $6 more per hour on average Walmart could reduce base wages to about $6 per hour and pocket all the round up since people have shown they are willing to work for $12 per hour. This qualification assures that the workers and the labor market benefit from the Round Up Service Charge Tax Credit Incentive.
Employers may require up to 30 days of employment to include new employees in the distribution of the Round Up Service Charge. The idea being that new employees contribute less during training periods and may not work out. Team members shouldn’t receive less while new employees are learning the job and may not stay.
RUSC increases wages for workers in high volume transaction industries.
RUSC increases wages for unskilled workers
RUSC allows companies in HVTIs to make more money
RUSC will create more demand for retail and fast food jobs which commonly experience a shortage of workers
RUSC increases employee efficiency in HVTIs as the employees have a stake in the amount of people they serve.
RUSC increases public revenue by creating a greater pool of taxable income.
RUSC decreases federal spending reducing the number of people who are reliant on government benefits
RUSC decreases federal spending by reducing the demand for coin currency.
RUSCTCI is a mechanism to improve wages for unskilled workers who tend to be in the bottom 40% of income earners and below, and will increase profits and efficiency for companies in retail and fast food, as well as increase public revenue without fail, and produce the other mentioned benefits. There is more money for the working poor, there is more money for companies employing unskilled workers, and there is more money for the public in using the mechanism produced through this legislative proposal. The cost to consumers is insignificant, becoming less significant as unskilled workers earn more, and less significant with the natural growth of inflation over the years.
(1): A High Volume Transaction Industry (HVTI) is defined as a business that averages 5 in person transactions per employee per hour. This is a preliminary definition subject to change if upon further research the definition could cause the RUSCTCI to be taken advantage of at the detriment to public interest.
(2): As of January 20th, 2020, it is estimated that Walmart locations average about 10,000 car visits according to The Institute of Transportation Engineers. Not all cars entering a Walmart parking lot are there to make purchases. I’m assuming there are 9,000 transactions per day, and about 45 people working per shift (according to a Walmart manager) Presuming the store is open 16 hours per day the total daily service charges would be split between 90 workers. Since there is no greater likelihood that a total will be closer or further away from the next dollar the average round up is $.50. $4500 split amongst 90 workers is $50 dollars per person, or an additional $6.25 per hour. 1/9/2020 8th and Walton. 8th and Walton is a consulting firm that contracts with Walmart that published the findings of The Institute of Transportation Engineers https://www.8thandwalton.com/blog/walmart-foot-traffic/ Stephen Comeau managed the electronics department in a Walmart from 2013 to 2020 and reported about 45 workers present during a typical shift. This testimony was used to source an estimate of the number of employees working during a typical shift, and in person interviews yielded a similar estimate range where I was told 30 to 60 employees working during business hours at a given time, depending on the time of day, day, and time of year https://www.quora.com/How-many-Walmart-employees-are-working-in-the-store-in-during-an-average-day-at-the-same-time
(3): RUSC is the abbreviation for Round Up Service Charge
(5): 12/20/2022 Pay Scale Research, Average Hourly Rate for Walmart Employees. Cashiers, Store Associates, and Stockers earn between $10 and $15 and $10 and $16 per hour averaging roughly $12 according to the site presumably averaged from the actual numbers. https://www.payscale.com/research/US/Employer=Walmart.com/Hourly_Rate
(6): $12 per hour * 40 hours * 52 weeks = $24,960
$12 per hour + 6.25 RUSC per hour = $18.25 per hour * 40 hours * 52 weeks = $37,960
(7): 1/8/2023 Talent.com Income Tax Calculator. The user must input a state Nevada was the state from my search, probably based on a recent search in that location, but the state doesn't change the federal income tax rate or payroll tax rate. https://www.talent.com/tax-calculator?salary=24960&from=year®ion=Nevada
(8): 1/8/2023 Talent.com https://www.talent.com/tax-calculator?salary=40788&from=year®ion=Nevada
(9): $37,960 pays $2904 in payroll tax $37,960 pays $2796 in federal income tax
$24,960 pays - $1910 in payroll tax $24,960 pays - $1236 in federal income tax
The difference is $ 996 The difference is $1560
(11): Retrieved 1/8/2023 Walmart Corporate About Section 1.6 Million employees in the US. https://corporate.walmart.com/about#:~:text=Walmart%20operates%20approximately%2010%2C500%20stores,Walmart%20U.S.
(12): In 2021 we spent roughly $764 million dollars minting new coin currency. The prospect of savings in this area may amount to a few hundred million dollars. Not significant considering the overall size of the budget, but still a benefit worth mentioning. Department of the Treasury United States Mint, “Congressional Budget Justification and Annual Performance Plan and Report Fiscal Year 2021”. Page 4, Resource Detail Table estimated cost for manufacturing circulating coin currency 2021: $764,159. Whether they minted this amount of coin currency in 2021 is irrelevant because it is likely what they received for their 2021 budget. https://home.treasury.gov/system/files/266/22.-Mint-FY-2021-CJ.pdf I previously had a figure of about 600 million dollars for 2021 or 2022 but I was unable to relocate the source of that figure having not recorded it at the time I viewed it.