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House advances bill exempting tips from tax after rejecting income cap amendment
Summary
House Bill 2081, which would exempt tip income from state taxation, advanced after the House rejected a floor amendment that would have capped the exemption at 80% of area median income; debate focused on fiscal impact and compliance concerns.
The Arizona House advanced House Bill 2081, a measure to remove tax on tips, after the panel adopted committee amendments and rejected a floor amendment that would have limited the benefit by income. The Committee of the Whole recommended the bill do pass as amended and the House subsequently adopted that recommendation.
Representative Griffin, the bill sponsor on the floor, said "tips in my opinion are gifts and should not be taxed," arguing the change would benefit low- and middle-income workers who receive tips. Opponents and questioners repeatedly raised fiscal and compliance concerns during an extended floor debate.
Representative Blackman cited a fiscal note he said estimated the proposal would cost the general fund $31 million and warned that the fiscal impact did not account for possible behavioral changes. "It's $31,000,000 to the general fund," Blackman said. Blackman and others proposed an amendment to cap the exemption so higher earners would not benefit; the amendment tied a cap to 80% of area median income (AMI), which Blackman said was approximately $57,000.
Members questioned the practicality of administering an AMI-based means test for a tax change. Representative Neil Carter raised federalism and compliance objections, saying HUD's AMI determinations are not a tax definition and that requiring taxpayers and the Department of Revenue to use HUD data would be burdensome. Questions were also raised about whether the Department of Revenue or other agencies would compute AMI for taxpayers.
On the floor, Representative Blattman moved a floor amendment and a series of members questioned and commented on that amendment and on the underlying bill. After debate, members voted on the floor amendment; the chair announced "present nays have it," indicating the amendment failed. The Committee of the Whole then moved to recommend HB 2081 do pass as amended, the recommendation was reported, and the House sent HB 2081 to engrossing as amended. The transcript records voice votes; no roll-call tallies were recorded in the provided transcript.
