The Federal Government Just Overstepped Arizona

Tipping culture is a uniquely American experience. Many of our workers rely solely on the tips they receive, and even that's barely enough to just scrape by.

A new policy that's just been enacted by the federal government may help to level the playing field, but it's directly ignoring Arizona voters wishes.

"No Tax on Tips"

Recently, the Senate unanimously passed a new Tax Break for those who rely on cash tips to supplement their income. This would allow deductions of up to $25,000 a year for these workers, with an earnings limit of $160,000.

If workers receive $20 or more in cash tips a month, they must be reported to the IRS. No longer. This effectively allows for all cash tips to be exempt from taxes, meaning these tipped workers come away with more than they typically would.

Inside Arizona's Tipping Crisis

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Working Against Arizona

In 2024, Arizona took Prop. 138 to the ballot box, which would have allowed employers to pay less in the exchange that tips are tax free. The proposition failed at the voting booth, which made many Arizonans disappointed, this new Federal ruling seems to rectify that.

There are, however, holes in the system. Employers could begin to start tipping workers that typically are not, or straight up misclassifying part of their income as tips in order to get tax exemption. These are all very serious concerns, but the hope is everyone plays by the rules in order to ensure our tipped workers receive the benefit they've been looking for for so long.

[CNBC][Proposition 138]