Ohio Considers Bill to Exempt Tips from State Income Tax
COLUMBUS, Ohio – Ohio may soon join a national movement to eliminate income taxes on tips, thanks to House Bill 209. This proposal aims to exempt tips from state income taxes, allowing workers in service industries to view them more as bonuses for good service.
Rep. Brian Lorenz, a Republican from the Columbus area and the bill’s sponsor, highlighted his personal connection to the initiative, recalling his own experiences bartending and waiting tables while putting himself through college. "I know what it’s like to depend on those tips,” Lorenz remarked. He explained that the legislation aligns with ongoing efforts at the federal level, where Republicans are seeking to fulfill a campaign promise from former President Donald Trump to eliminate federal income taxes on tips.
Under current law, tips are taxed identically to wages, requiring employers to report them on workers’ W-2 forms. If HB 209 passes, this income would no longer be considered taxable in Ohio. Lorenz has asked the nonpartisan Legislative Services Commission to estimate the potential revenue loss, although he believes it won’t amount to billions.
While there is currently no opposition to the bill, experts from the Brookings Institute caution that exempting tips from taxation could lower Social Security benefits and create loopholes for tax avoidance. They argue that granting preferential treatment to one type of income could incentivize taxpayers to misclassify their earnings.
The bill is scheduled for its first hearing in the House Ways and Means Committee on Wednesday. As Ohio weighs the implications, advocates argue that the bill would support workers and encourage local spending. Anna Staver reports for Cleveland.com/The Plain Dealer.
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