Relating to: an income tax exemption for cash tips paid to an employee. (FE)

Wisconsin lawmakers approved a bill that would exempt cash tips from the state income tax, but the measure failed to become law after Gov. Tony Evers objected under Joint Rule 82. The proposal, known as AB 38, would have applied to tipped income through 2028 and mirrored a federal tax break for workers who rely on gratuities.

The Wisconsin State Legislature passed the measure earlier this year, with supporters saying it would help service workers keep more of what they earn and give a boost to restaurants and other labor-intensive businesses. The bill also would have covered electronic tips and phased out for higher-income filers.

For Milwaukee, where hospitality, food service and personal care jobs make up a meaningful share of the local economy, the proposal would have directly affected thousands of workers. A state tax exemption on tips could have put a little more money in the pockets of servers, bartenders, hair stylists and other tipped employees facing higher everyday costs.

It remains unclear whether lawmakers will try again. Any future version would need to clear the Wisconsin State Legislature and avoid another veto if it is to take effect.