(The Center Square) – Wisconsin lawmakers are looking at a bill that would exempt tips from state income tax, a measure that would match an end to taxes on tips in a federal reconciliation bill.
The Wisconsin bill would be a tax that is capped at a $25,000 benefit for employees in jobs that are tip-based and an amendment assures that Assembly Bill 28 applies to both cash and credit-based tips.
“I really think we’ve got to do it and we’ve got to do it now,” Sponsor Rep. Ron Tusler, R-Harrison, said during a public hearing in the Assembly Committee on Ways and Means.
The bill would exempt an estimated $33.7 million in tip income from taxes. A 2013 study showed that about 20% of tips are cash.
Sen. Andre Jacque, R-De Pere, said that the proposal is similar to one proposed during the 2019-2020 session, which had bipartisan support, and a measure that Gov. Tony Evers put in his budget proposal.
Jacque noted that the measure would be more encouragement for tip-based employees to accurately report tips in taxes, something that can benefit them when looking for a home, mortgage or credit.
“Currently there is a disincentive for accurately reporting tips,” Jacque said.
Susan Quam, Wisconsin Restaurant Association Executive Vice President, said that while tips might not have been the group’s top suggestion for tax relief in the industry, it does support the measure in what is “overall a tight margin industry.”
She noted that the Internal Revenue Service carefully tracks tip reporting at restaurants, comparing the reported tips on credit against cash tips to ensure that a similar percentage of tips are reported for each form of payment and charging businesses if the percentages do not match.
Tusler was asked by a fellow lawmaker why tipped workers were being separated out for tax relief and noted that those workers are some of the most in need of tax relief as they attempt to make ends meet.
“I’m thinking about how to lower taxes every day,” Tusler said. “Less taxes would mean less government.”
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