Bill eliminating taxes on tips moves forward in Georgia Senate
TAOS, NEW MEXICO - MAY 15, 2019: Money in a tip jar in a Taos, New Mexico, coffee shop includes a two dollar bill. (Photo by Robert Alexander/Getty Images)
ATLANTA - A new bill could exclude tips from taxable income for Georgia workers.
The proposal, titled SB 2, was approved to move forward by the Senate Finance Committee on Wednesday.
What we know:
The bill would adjust the Georgia tax code to exclude cash and electronic tips from taxation starting from January 2025. Currently, tip income is included in both federal and Georgia Adjusted Gross Income and taxed as ordinary income.
The tips would also include the value of any non-cash items like tickets, but would not include service charges like automatic gratuities.
As part of the proposal, employers would need to submit to the Department of Revenue the total amount of tips each of its employees received for the year.
The backstory:
The push to remove tips from taxable income began to spread after then-candidate Donald Trump announced the idea during a rally in June in Las Vegas.
"To those hotel workers and people who get tips, you are going to be very happy, because when I get to office we are going to not charge taxes on tips, people making tips," Trump said at the rally. "... We’re going to do that right away, first thing in office."
The Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, argued that exempting tips from taxation would also lead employers and workers to reclassify wages as tips where possible. The more that happens, the more that deficits could increase.
The Budget Lab at Yale, a non-partisan policy research center, estimates that there were 4 million U.S. workers in tipped occupations in 2023. That amounted to about 2.5% of all employees, including restaurant servers and beauticians.
By the numbers:
According to data from State Auditor Greg S. Griffin, the change to tax policy would cost the state somewhere between $64.1 million and $110 million every year.
While the Department of Revenue does not believe it would need additional funds to make the change, officials say changes to the information technology infrastructure would take around 12 weeks.
What's next:
After passing the committee, SB 2 will now go to the Senate floor for consideration. It is not unknown what time it will be debated on the floor.
The Source: Information for this story was taken from Senate Bill 2, a report by the Georgia Department of Audits and Accounts, previous FOX 5 stories, and the Associated Press.