Tax Exemptions for Tips and Overtime Face Debate
Wisconsin business owners should prepare for potential tax code shifts as candidates weigh the $2.76 billion revenue impact.
Updated on Oct. 27, 2026 in Employment
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Should Wisconsin eliminate state taxes on tips and overtime even if it reduces public service funding?
A new Forward Analytics report estimates that eliminating state taxes on tips and overtime would cost Wisconsin $2.76 billion in revenue over 10 years. The policy change remains a point of contention for local business owners and candidates ahead of the November 3 election.
Why it matters
For business owners relying on tipped or hourly workforces, this fiscal estimate highlights the potential scale of state-level tax code shifts. The debate underscores the competing interests of offering worker tax relief versus maintaining state-funded services and budget stability.
Forward Analytics projects a $2.76 billion state revenue loss over a 10-year period if Wisconsin exempts tips and overtime from state income taxes. This estimate measures the total fiscal impact relative to the state's current tax code baseline.
The players
Forward Analytics
A research organization that provides data analysis on fiscal and economic policy trends in Wisconsin.
Tony Evers
The Governor of Wisconsin, who has previously vetoed legislation aimed at altering tax treatment for tipped workers.
The details
The analysis focuses on the impact of exempting tipped and overtime wages from state income tax, a change that would require a formal update to the Wisconsin tax code. Proponents argue it provides necessary relief for workers, while opponents cite the potential for inequity compared to salaried employees and the long-term pressure on state service funding. The proposal follows the July 4, 2025, federal exemption of these earnings.
Timeline
July 4, 2025: Federal taxes on tips and overtime ended.
April 2026: Governor Tony Evers vetoed a Republican-led tax-on-tips bill.
November 3, 2026: The Wisconsin gubernatorial election takes place.
Market Landscape
The state-level proposal follows the July 2025 federal tax exemption on tips and overtime. It marks a continued effort by policymakers to align state tax code with federal changes, though current debates highlight the significant budgetary trade-offs involved.
Business owners should monitor the gubernatorial race for signals on potential state tax code shifts that could impact payroll compliance. If enacted, such changes would require updating payroll systems to distinguish between taxable and exempt income categories at the state level.
The takeaway
The $2.76 billion revenue loss projection highlights the structural importance of this tax debate to state budget planning. Operators should track the specific tax code language proposed in future sessions to understand how exemptions might be applied to payroll and reporting requirements.
Further reading
For broader trends affecting the state labor market, review the latest Employment updates.
Source note: This article includes information reported by WLUK.
Live Poll
Should Wisconsin eliminate state taxes on tips and overtime even if it reduces public service funding?
