The Michigan House of Representatives approved a budget plan Tuesday that would eliminate state income tax on tips for restaurant servers and other tipped workers.
- Michigan House of Representatives approved a budget that would eliminate state income tax on tips
- Additional savings would save tipped workers about $4 for every $100 earned in tips
- This could be signed into law if it passes the Michigan Senate
The proposal builds on federal legislation from July that already exempts tipped workers from paying federal tax on their first $25,000 in tip income. That federal change saves a single server a maximum of $2,700 per year on federal income tax.
The new state-level change would provide additional savings. With Michigan's state income tax rate at about 4%, a tipped worker would keep an extra $4 on a night where they earn $100 in tips if the proposal is approved.
A Republican state representative from metro Detroit said in a release the change would provide meaningful relief.
"Getting rid of taxes on tips at the state level will do even more to help those who rely on tips for their income," the representative said.
Kirk Root, general manager of Cascades Manor who previously managed several restaurants, believes the move could benefit the service industry.
"I know that the service industry struggles all the time," Root said.
Root also suggested the tax elimination might help with staffing challenges facing restaurants.
"It may enhance a new crowd of people to come work in the service industry," Root said.
I reached out to the deputy press secretary of the Michigan Senate Democratic Caucus but they were not able to provide a statement.
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