(The Center Square) – A new report says that eliminating a tax on tips and overtime would have a $2.7 billion impact on state tax collections over the next 10 years.
The Wisconsin Legislature approved a bill that would eliminate the taxes, matching federal policy, but that bill was then vetoed by Gov. Tony Evers. The proposal was then part of a $1.8 billion surplus deal that was voted down by the Senate in May.
Republican candidate for governor Tom Tiffany has promised to cut state income taxes by 10% for families earning less than $150,000 annually along with eliminating taxes on tips and overtime and returning a state surplus to voters.
The estimates come from Forward Analytics, a subsidiary of the Wisconsin Counties Association.
They are based on May estimates from the Wisconsin Legislative Fiscal Bureau, which showed that the proposal would reduce individual income tax collections by $232.8 million ($179.9 million in overtime, $52.9 million in tipped income) in 2026-27 and $197 million ($148.1 million in overtime and $48.9 in tipped income) in 2027-28.
“A ‘no tax on tips’ policy would put more money back in the pockets of many Wisconsin workers, and it would also carry a real cost to the state,” Jacob Anderson, research analyst at Forward Analytics, said in a statement. “Lawmakers should weigh both sides and clearly outline who stands to benefit. There may be unintended consequences if the policy is not thoughtfully considered before enacted.”
The report also highlights how the legislation would create a difference in the tax obligations of similar workers making similar salaries by highlighting that a waiter making $40,000 in a year with $15,000 of that in tips would pay $716 less in state income tax than an administrative assistant that makes $40,000 in a year.
“If the political and public support for this type of policy remains strong, it is important that future political debates have an analytical foundation that clearly explain who benefits, what the short and long-term costs are, and broader consequences for the Wisconsin tax structure and economy,” the report concludes.