Republican proposal would exempt tips and overtime from Connecticut income tax
Some Connecticut Republicans are proposing the state should stop taxing tips and overtime pay, mirroring a new federal tax change already affecting workers across the country.
Restaurant and hospitality employees who filed their federal taxes this year may have noticed larger refunds because tips and overtime are no longer subject to federal income tax under a law passed by the Trump Administration.
At the Capitol in Hartford, House Republicans said Friday they want Connecticut to adopt the same policy as a way to ease affordability pressures for workers in the state.
The actual text of the bill itself is 29 words:
That title 12 of the general statutes be amended to exempt the amount of tips or gratuities declared by a taxpayer and overtime pay from the personal income tax.
In a press conference Friday, Republicans said exempting tips and overtime pay would allow service‑industry workers to keep more of the money they earn and help businesses struggling to fill shifts.
Rep. Joe Polletta (R-Watertown) said the state should follow the federal government’s lead.
“Why not extend this benefit? It is the commonsense thing to do,” Polletta said. “This should not be a political issue. This is a commonsense issue. These are people that have been hit by inflation.”
House Minority Leader Vincent Candelora also argued the policy could help employers fill critical staffing gaps.
“We have a workforce shortage in the state of Connecticut. It’s a problem. This kind of policy will keep us competitive for our workforce,” Candelora said.
Republicans estimate the proposal would cost the state about $126 million in annual tax revenue. Candelora said the state’s recent surpluses leave room to absorb the impact.
“We’ve had billions of dollars of surpluses, and we should be prioritizing what we’re giving back to the people,” he said.
Asked about the proposal for no tax on tips or overtime, Rep. Jason Doucette (D-Manchester) said his Tax Equity Caucus are looking at a different approach to affordability: “We’re trying to get to the same place I think. We have some different ideas.”
Democrats propose a fully refundable child tax credit, funded by increasing taxes on Connecticut’s highest earners.
He said recent federal tax code changes benefiting the wealthiest residents mean those households can shoulder more of the cost of relief programs for working families.
“Those folks can help to pay for the things that we want to do to provide real relief to working families,” Doucette said.
Gov. Ned Lamont’s communications director, Rob Blanchard said in a statement that the governor “welcomes a bipartisan commitment to reducing costs for Connecticut families.”
“The administration will closely monitor these proposals as they advance through the legislative process and will work hand-in-hand with legislative leaders to deliver an honestly balanced budget that strengthens affordability and long-term fiscal stability,” Blanchard wrote.
Michelle Nicholson, owner of The Flour Girl Bakery and Cafe in Hebron, testified in support of the no tax on tip proposal.
“I think it’s a really important bill that can help people very quickly with minimal effort,” Nicholson said at a press conference with Republicans.
Nicholson said overtime is essential for keeping her business operating when staff members need to fill extra shifts. She believes allowing workers to keep more of that pay would make a meaningful difference.
At her café, special events manager Shaelie Watrous said losing part of her tips to taxes takes away from what customers intend to give.
“It’s like them showing us love. And then if we do get taxed off of it, it’s like taking away that love,” Watrous said. “It can be hard to pay bills and payments, especially in a high income or a high taxed area.”
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