Wisconsin state lawmakers are debating a proposal to eliminate taxes on income earned through tips.
At a hearing of the Assembly’s Ways and Means committee on Thursday, lawmakers took public testimony about the GOP bill, which would offer a state tax deduction for both cash and credit card tips up to $25,000 per year, phased out for higher-earning households.
The Wisconsin Department of Revenue’s estimate about the cost of the bill looked at an earlier version that did not include the $25,000 cap and only applied to cash tips. That estimate said exempting all tips from income tax would reduce state revenue by $33.7 million per year. It is unclear what the cost would be when the cap is applied.
According to the Department of Revenue, tips made up about 0.51 percent of all reported income in Wisconsin in 2021. That number has likely increased since restaurants returned to full strength following the COVID-19 pandemic.