I’m quite sure that less than 100% of cash tips are reported as income to the IRS and state revenue departments.
There are a few exceptions who report it all I'm sure. However a good waiter/waitress can make as much as a good software engineer working less hours. Good is key though, most don't have the personality to rake in the tips. It is a pleasure getting good service where the 25% tip is deserved, it is painful having to give a 10% tip for bad service.
Doubling their rate to $20/hr would be a pay cut.