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Subcommittee carries over bill to exclude tips from state income tax after sponsor seeks amendments
Summary
Senators debated S.234, which would exclude customer tips from gross income for state individual income tax; sponsor and members agreed to draft a perfecting amendment and carry the bill over for further subcommittee work.
The Senate Finance Committee sales and income tax subcommittee agreed to carry over S.234, a bill that would exclude tips received by workers from state individual income tax gross income.
Committee staff explained the bill would modify the definition of gross income to exclude tips “included on statements furnished to the recipient's employer required by federal law,” and defined tips broadly to include cash and electronic tip payments determined by a customer. The bill took effect upon approval by the governor in its initial language.
Sponsor Sen. Lieber told the subcommittee the measure is popular in his district, where the hospitality sector is large, and said voters favor “no tax on tips.” He described the measure as broadly applicable to anyone receiving tips, not only food‑service workers. During questioning, a senator raised a hypothetical arrangement in which a customer could recharacterize payment as a lower reported wage plus a tip; supporters acknowledged potential abuse could exist and suggested the federal tax framework and enforcement would limit misuse. Sen. Lieber agreed to work with colleagues on a perfecting amendment. The subcommittee voted to carry the bill over and take up the amendment at a subsequent subcommittee meeting.
