Virginia Governor Proposes No Tax on Tips in Budget Plan

December 17, 2024 TruthUSA

The Governor of Virginia, Glenn Youngkin, has unveiled a budget plan aimed at exempting service tips from the state income tax.

On Monday, Youngkin stated that this initiative is expected to return approximately $70 million to Virginians annually.

“To date, we have provided over $5 billion in tax relief, and we are committed to reducing the cost of living for dedicated Virginians. It belongs to them, not the government,” the governor conveyed in a statement.

“Eliminating tips from taxable income will directly boost the take-home pay of hundreds of thousands of Virginians, enhancing their purchasing power, which will foster financial stability, invigorate local economies, and recognize the worth of their hard work.”

The governor referenced data from the Virginia Department of Taxation and the Virginia Employment Commission, indicating that over 250,000 Virginians in the food service, beauty, and hospitality sectors could benefit from this proposed tax relief.

During the campaign, President-elect Donald Trump promised to eliminate taxes on tips, claiming that the idea originated from a waitress at his Las Vegas hotel.

“For those working in hotels and receiving tips, you will be pleased, as my administration plans to eliminate taxes on tips for those who earn them,” Trump remarked during a June event in Nevada, known for its high concentration of tipped employees.

Trump has yet to clarify whether the exemption would solely apply to income taxes or include payroll taxes as well.

Senator Ted Cruz (R-Texas) and Representative Byron Donalds (R-Fla.) have proposed a bill that limits the exemption to income taxes only. In contrast, Representatives Thomas Massie (R-Ky.) and Matt Gaetz (R-Fla.) introduced a different bill earlier this year that would extend this exemption to payroll taxes as well.

Under Youngkin’s plan, workers who earn tips can claim a deduction on their state tax return if that income is included in their federal adjusted gross income.

Exempting tips from taxation would support workers who earn a significant portion of their income from tips. According to the Tax Foundation, some individuals who receive tip income already pay no personal income tax, as many are part-time employees earning less than the standard deduction. Additionally, some tip earners benefit from the earned income tax credit or child tax credit, which can eliminate their federal tax liability, as noted by the Tax Foundation.

A survey conducted by consumer financial services firm Bankrate reveals that two-thirds of Americans view tipping negatively, and the proportion of individuals who always leave a tip has decreased over the past two years.

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