Topics: California, Chicago, Donald Trump, Illinois, Money, New York, Politics, US News, Business
Several states are not adopting a policy from Donald Trump to lift taxes on tips in his One Big Beautiful Bill Act.
The US tipping culture is unusual compared to the rest of the world, in that many employees in the service industry rely on tips to make up the majority of their income, though it varies by state.
In some states, businesses can pay their tipped staff below the the federal minimum wage if they can show that staff receive at least minimum wage once including tips. Meanwhile, other states require businesses to pay their tipped staff a higher wage, but tips have to be split among the non-tipped staff as well, such as chefs.
But one of the policies in Trump's economic bill includes a tax relief on tipped workers, but this has not been adopted in several states when the bill comes into force on January 1.
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Some states are adopting the federal policy, while others are taking a more moderate approach. It varies as some states will automatically adopt the federal tax codes, while others manage their taxes more directly so would need to pass legislation at the state level to approve the changes.
But which are the states which have indicated they will not adopt the federal policy?
New York is the first, with Reuters reporting that it will require people to include a tip or overtime deduction on their federal tax return.
They cited the need to protect over a billion dollars in annual revenue.
Nonetheless, a spokesperson for New York Governor Kathy Hochul did not entirely rule out action.
In a statement, the spokesperson said: “We will continue finding ways to put money back in New Yorkers’ pockets and will evaluate federal changes in the context of the upcoming budget, just like red and blue states across the country."
Leadership in California has signalled no intention to adopt the costs, saying that it wants to preserve the money to fund programs.
It would be an estimated cost of some $3.2 billion for California.
A spokesperson for the California Franchise Tax Board said that 'legislation would generally be required for California to conform to provisions within the federal One Big Beautiful Bill Act.'
Illinois will also be taxing tips as well. This will be done by requiring an 'add-back' for tax deductions on tips or overtime.
An 'add back' is an adjustment made when calculating tax to make sure that the revenue someone is filing is fully representative of their earnings.
Some states automatically align with federal taxes, including South Carolina, Iowa, North Dakota, Idaho, Montana, and Oregon.
However others will need to formally adopt the federal policies at the state level.
So that means they won't automatically come into effect, though many states have plans to adopt some of the proposals in Trump's Big Beautiful Bill Act.
