A group of Connecticut lawmakers supports a bill to eliminate the state income tax on overtime pay and tips.
The “No Tax on Tips” bill would be an extension of federal legislation that passed last year. House Bill 5010 seeks to eliminate state taxes on tips or gratuities, which taxpayers are required to report as income. The bill would also create an exemption from overtime pay from the personal income tax.
Scott Dolch is the president of the Connecticut Restaurant and Hospitality Association. Dolch said the association represents 170,000 employees in Connecticut. He said the bill would impact around 75,000 service employees. Dolch urged members of the state legislature to support the bill as a bipartisan effort to support Connecticut residents.
“Connecticut is unfortunately one of the most expensive places to live. It's not a partisan conversation to say that; we know that. Any way that we can do something to help our middle class, to help our workers and especially in our industry, it sends a powerful message,” Dolch said.
Supporters of the bill spoke Friday at the Finance, Revenue and Bonding Committee public hearing. Michelle Nicholson is the owner of The Flour Girl, a bakery in Hebron, Connecticut. Nicholson employs roughly 35 people across her businesses.
“When working people keep more of their earnings, that money tends to move quickly through our local communities, paying for gas, groceries, childcare, and spending at other small businesses. The local circulation supports the regional economy and even more revenue for the state,” Nicholson said.
Nicholson said employees are more likely to agree to work overtime shifts if they know they won't be taxed any further. She said overtime pay, when a worker is paid 1.5 times their usual hourly rate, puts some employees into a higher tax bracket. Nicholson said the pay is not reflective of their financial reality.
“An overtime shift isn't a windfall. It is what happens when someone stays late, covers a shift or shows up when the schedule is tight. Those are the hours and earnings that keep our community running and they keep restaurants and cafes staffed. They keep hotels running and they keep deliveries moving,” Nicholson said.
At a briefing before the committee meeting, Representative Vincent Candelora spoke about other ways the government could collect taxes that would place less of a strain on hourly workers. Candelora said the government shouldn't tax income that is inconsistent, such as tips and overtime pay, which can vary by week.
“We should be prioritizing what we’re giving back to the people. We believe that people who are working overtime and working tipped wages, which are unpredictable on any given day. We just shouldn't be subjecting that to taxation. The government doesn't need the money,” Candelora said.
State Representative David Rutigliano said the bill would especially benefit employees in the hospitality industry whose income can be unpredictable. Rutigliano, who is also a small business owner, said he wanted to support the bill on behalf of his employees.
“This is one way to give people a break. Something that the federal government has done that we can now do in Connecticut to put more money in the pocket of hard-working men and women,” Rutigliano said.
