It is cute that you think people who receive cash tips pay taxes on amounts received over those tips necessary to get them to the statutory minimum wage that the employer reports so they do not get sued.
While generally I agree that if a law is stupid, and people don't follow said law because it's stupid, we are better off just getting rid of the law, among other things so that the Police can't decide to selectively enforce it just to harass people....
Eliminating taxes on tips because people are evading taxes on tips is a pretty dumb take.