That's not really part of this problem though, as even if they were compensated for gas and insurance for the car, this still applies.
Fundamentally, people are outraged because essentially tipping is subsidizing the wages the employer should be paying, and that's the case even with a restaurant.
The issue is the tipping system. It's counterintuitive but your "generosity" with a tip, once it becomes standard cultural practice, ends up in one way or another getting nullified by the employer. And there's no real way to prevent this as the OP said, money is fungible, so if the employee gets paid more in some way it all just becomes their total earnings in the end, which saves the employer from having to make up that difference because the market price for the employee's time and labor is fixed.
There is absolutely way to prevent this. We could enact laws to clarify that tips are between the customer and the employee and have no effect on the company's legal obligation to pay minimum wage. That is how the law actually is written in a number of states.
Or enact a law that bans tipping. There are plenty of societies that ban tipping, including places that are more advanced than the US like Japan. Not to mention tipping is another surface area for potential money laundering and tax evasion.
In a restaurant it’s not per transaction so it’s not directly rendering your generosity ineffectual. It’s a matter of degree and convention but not insignificant.
Fundamentally, people are outraged because essentially tipping is subsidizing the wages the employer should be paying, and that's the case even with a restaurant.
The issue is the tipping system. It's counterintuitive but your "generosity" with a tip, once it becomes standard cultural practice, ends up in one way or another getting nullified by the employer. And there's no real way to prevent this as the OP said, money is fungible, so if the employee gets paid more in some way it all just becomes their total earnings in the end, which saves the employer from having to make up that difference because the market price for the employee's time and labor is fixed.