KDSN RADIO News
Iowa House bills would erase state income tax on tips, overtime pay
Bills ready for debate in the Iowa House would implement tax breaks on tips and overtime pay at the state level similar to those President Trump has proposed at the federal level.
One bill would eliminate the state income tax on up to $25,000 worth of tips for Iowans with an annual income under $155,000. Representative David Young of Van Meter said it removes the paperwork burden for workers who earn tips and their employers, and would be an income boost for Iowans who depend on tips for their income.
“It means we are showing our appreciation and commitment to these valued service workers who are a part of not just our economy and workforce, but they’re a part of our community,” Young said.
Another bill would eliminate the state income tax on overtime pay. Representative Mike Sexton of Rockwell City said he heard about this issue from voters during the fall campaign. “Our citizens are being asked to do more because we have a shortage of workers,” Sexton said, “and so they asked to work overtime to keep our ethanol plants and our factories, and our construction projects going.”
The tax break on overtime pay would be for employees asked to work more than 40 hours in a week and earn pay during overtime hours that’s at least one and a half times their regular hourly rate.
These bills on tips and overtime pay got “yes” votes from all the Republicans and Democrats on the House Ways and Means Committee yesterday. There’s no analysis on how much these tax breaks would be worth to Iowa workers in total, and no estimate of how much state revenue would dip if tipped workers and employees paid to work overtime get these tax breaks.
