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Wisconsin Could Become First State To Exempt Waiters, Other Workers’ Tip Income From Taxes

Workers Would Still Be Required To Report Full Income On Federal Returns

tip jar
Lynne Sladky/AP Photo

Wisconsin could become the first state to exempt waiters, waitresses and other workers’ money from cash tips on their taxes.

A measure in the state Legislature would make it legal for people like servers, valets, golf caddies and other workers who are usually tipped to not report the money on their state income taxes. Workers would still be required to report their full income on the federal level.

The legislation is “the baby,” as he termed it, of state Rep. Cody Horlacher, R-Mukwonago. He said he introduced the bill because he knows most tipped workers depend on the cash. Horlacher said his experiences working at a golf course in college showed him the importance of a job well done.

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“You are busting your tail, and at the end of the night, you would walk out with however much and you need to report that to the government even though the government has had nothing to do with helping you actually bus those tables, take those bags,” Horlacher said.

State Sen. Andre Jacque, R-Green Bay, the bill’s co-sponsor, said workers routinely underreport their cash earnings and shouldn’t be under scrutiny on the rare occasion the tax collector comes calling.

Wisconsin employers can pay as little as $2.33 per hour to tipped employees as long as they aren’t required to share their earnings with people such as cooks or dishwashers, said Susan Quam, the executive vice president of the Wisconsin Restaurant Association. She said employers are allowed to take a “tip credit” and pay their workers well beneath the minimum wage.

“If they are taking the tip credit, then there cannot be a mandatory tip pool that requires the servers to tip out, or anyone else who takes tips to tip out the back of the house,” Quam said.

“Back of the house” refers to chefs, dishwashers, and bussers.

Quam said the association doesn’t have a position on the measure yet. She said the organization will ask members their opinions at a meeting next week.

The two Republicans said they hope for committee hearings on the bill this summer.