States are divided on whether to follow Trump’s tax breaks on tips, overtime, and more |
To tax tips or not? That is a question that will confront lawmakers in states across the U.S. as they convene for work next year.
President Donald Trump’s administration is urging states to follow its lead by enacting a slew of new tax breaks for individuals and businesses, including deductions for tips and overtime wages, automobile loans, and business equipment.
In some states, the new federal tax breaks will automatically apply to state income taxes unless legislatures opt out. But in many other states, where tax laws are written differently, the new tax breaks won’t appear on state tax forms unless legislatures opt in.
In states that don’t conform to the federal tax changes, workers who receive tips or overtime — for example — will pay no federal tax on those earnings but could still owe state taxes on them.
States that embrace all of Trump’s tax cuts could provide hundreds of millions of dollars of annual savings to certain residents and businesses. But that could financially strain states, which are being hit with higher costs because of new Medicaid and SNAP food aid requirements that also are included in the big bill Trump signed.
Most states begin their annual legislative sessions in January. To retroactively........