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Sponsor proposes ban on taxing tips for servers, sparking equity and enforcement questions
Summary
Representative Lorenz told the committee House Bill 209 would bar taxation on tips earned by service workers; lawmakers questioned equity across wage types, potential employer/employee shenanigans, and asked for fiscal analysis.
Representative Lorenz told the House Ways and Means Committee House Bill 209 would bar state taxation on tips earned by service workers such as servers and bartenders.
"Tips are a reward for hard work, not something the government should be dipping into," Representative Lorenz said, arguing the policy would let service workers "keep what they earn."
Committee members supported the objective of helping low-paid service workers but asked practical questions about how the change would interact with tipped minimum-wage arrangements, reporting, and fairness across industries. Representative Klick asked whether removing tips from the tax base would create inequity when salaried or factory workers pay tax on all income while tipped workers would have a tax-exempt portion.
Ranking Member Troy and others asked about potential "shenanigans" — employers reclassifying wages as tips to avoid payroll taxes or paying lower base wages. Lorenz said those enforcement and wage-floor concerns would be part of the technical design but described the bill’s primary goal as reducing tax burdens on service workers.
Committee members also asked for a fiscal estimate. The sponsor said a fiscal analysis was in progress and noted that nine states without an income tax have similar outcomes by virtue of not taxing wages generally.
No committee vote was taken; members requested fiscal detail and implementation language to address reporting and enforcement risks before any further action on the bill.
