Arizona Legislature Pushes Through Bill to Eliminate Taxes on Tips

By Daniel Stefanski |

Arizona is advancing a tax reduction measure aimed at providing financial relief for tipped employees. The Arizona House of Representatives Committee on Ways and Means has approved HB 2081, which seeks to exempt tips from the state’s individual income tax.

The bill’s sponsor, State Representative Gail Griffin, emphasized the importance of this legislation. “I worked in the service industry years ago and know the challenges faced by tipped employees,” she stated. Griffin argues that tips represent customer appreciation and should be treated as gifts, thus exempt from taxation. “HB 2081 ensures that Arizonans who rely on tips can retain more of their hard-earned money,” she added.

Support for the bill also came from Republican State Representative Neal Carter, who highlighted that effective taxation relies on simplicity and voluntary compliance. He expressed concerns that taxing tips complicates honesty in reporting, as they are often received in unpredictable amounts.

This initiative reflects trends set during the recent presidential campaign. Donald Trump proposed eliminating federal taxes on tips in June during his campaign in Nevada. His Democratic opponent, Kamala Harris, subsequently echoed this sentiment, indicating a potential bipartisan interest in the issue. On Inauguration Day this week, Trump remarked that his proposal might have played a key role in securing Nevada’s electoral votes.

A recent poll by The Associated Press-NORC Center for Public Affairs Research revealed that 54% of respondents support the elimination of taxes on tip earnings, highlighting public sentiment in favor of the initiative. The U.S. Bureau of Labor Statistics estimates approximately 2.3 million waitstaff across the nation, underlining the bill’s potential impact.

The Arizona House committee passed the bill on a party-line vote, with five Republicans supporting it and three Democrats opposing, one member being absent. Various groups showed their support for the bill, including the Republican Liberty Caucus of Arizona and the Fraternal Order of Police AZ State Lodge, while organizations like Living United for Change in Arizona voiced opposition.

HB 2081 is now set for a vote in the full Arizona House of Representatives, where its fate will be determined in the coming days.

Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.