Full Breakdown
New York's "No Tax on Tips" Proposal: A Response to Service Industry Concerns
1/2/2026, 2:40:39 AM
Overview of the Proposal
New York Governor Kathy Hochul (D) has announced a proposal for the 2027 fiscal year that aims to exempt up to $25,000 of tipped income from state income taxes. This initiative aligns with the federal "no tax on tips" policy established under President Donald Trump's "One Big Beautiful Bill," which allows qualified service workers to deduct tips from their taxable income. Hochul's proposal is part of her broader affordability agenda, which has already provided over $9 billion in tax relief since she took office.
Background and Context
The "no tax on tips" policy was a significant component of Trump's tax reform, designed to benefit service industry workers, including bartenders and waitstaff, who often rely heavily on tips for their income. The federal provision allows eligible workers to deduct up to $12,500 in tips annually, with a maximum of $25,000 for married couples filing jointly, effective from 2025 through 2028. However, many states, including New York, have yet to adopt similar measures, leaving local service workers feeling the financial strain.
Criticism from Service Workers
Despite Hochul's recent proposal, many service industry workers have expressed frustration over the delay in adopting the "no tax on tips" policy. Bartenders and waitstaff have voiced their concerns, stating that the lack of tax relief directly impacts their livelihoods. Rion Gallagher, a bartender, stated, “If we weren’t taxed on our tips, we’d be able to save more.” Zoe Kalodimos, a waitress, echoed this sentiment, saying, “It’s disgraceful that Hochul hasn’t extended President Trump’s ‘no tax on tips’ policy.” Many workers report losing significant income to taxes, with some estimating losses of up to $1,000 a month.
Official Statements & Responses
Hochul's office has framed the proposal as part of her commitment to making New York more affordable. In her statement, she emphasized, “I’m kicking the new year off with a proposal of no state income tax on tips, continuing my efforts to make New York more affordable for hard-working New Yorkers.” However, critics, including Nassau County Executive Bruce Blakeman, have accused Hochul of failing to act sooner, stating, “Kathy Hochul is sticking it to the service industry by blocking real tax relief on tips and overtime.”
Conflicting Reports & Gaps
While Hochul's proposal has garnered some support, there remains uncertainty regarding its implementation. A spokesperson for Hochul indicated that the state is still evaluating the issue, leaving many service workers and restaurant owners in limbo. Additionally, some reports suggest that New York lawmakers are hesitant to forgo over $1 billion in potential tax revenue, complicating the proposal's future.
What's Next
As the legislative session resumes on January 7, 2026, the fate of the "no tax on tips" proposal will be a focal point for both Hochul and the service industry. The outcome could significantly impact the financial well-being of many workers who depend on tips, as well as the broader restaurant industry still recovering from the COVID-19 pandemic.
Verbatim Quotes
- “If we weren’t taxed on our tips, we’d be able to save more, we’d enjoy life a little more, maybe we wouldn’t have to pick up that extra shift.” — Rion Gallagher, Bartender
- “4 Zoe Kalodimos, 30, a waitress at Embassy Diner in Bethpage, says it’s “disgraceful” that Hochul hasn’t extended President Trump’s “no tax on tips” policy.” — Zoe Kalodimos, Waitress
- “Kathy Hochul is sticking it to the service industry by blocking real tax relief on tips and overtime – costing servers up to $3,000 a year,” — Bruce Blakeman, Nassau County Executive
