Governor Kathy Hochul faces mounting criticism from New York restaurant workers for not extending former President Donald Trump‘s “no tax on tips” policy to state income taxes. This inaction has left many in the service industry feeling frustrated, as they rely heavily on tips to supplement their income.
On March 1, 2024, Rion Gallagher, a bartender at The Blasket in Midtown, expressed his discontent over the state’s failure to implement the federal policy. “If we weren’t taxed on our tips, we’d be able to save more,” Gallagher stated, highlighting the financial strain many workers experience. Under Trump’s policy, qualified service workers can deduct up to $12,500 of tip income annually on their federal taxes, along with a similar deduction for overtime pay. For married couples, these deductions double to $25,000 and are applicable for the tax years 2025 to 2028.
While several states moved to adopt the federal tax breaks, New York has not followed suit, leaving many service industry workers disheartened. Zoe Kalodimos, a waitress at Embassy Diner in Bethpage, Long Island, voiced her frustration, stating, “It’s disgraceful. People live off of tips.” Kalodimos estimates she loses approximately $1,000 each month due to tip taxation, which she claims are hard-earned through dedicated service.
Jackie Puttre, a manager at P. McDaid’s Irish Pub and a long-time server, criticized state lawmakers for their inaction. “Their hands are in everything, and now the state comes and screws you,” she said, adding that the situation is disheartening for workers who count on tips for their livelihoods.
The shift away from cash tips has compounded the issue. Many servers, including David Aju of Anatoly 56 Greek Taverna, noted that the trend toward credit card payments means that tips are more easily tracked and taxed. “I get most tips from credit cards, so that means everything is getting taxed,” Aju explained.
Hannah Teal, who works at George and Jack’s Tap Room in Williamsburg, echoed similar sentiments. She reported taking home only $40,000 after taxes last year and lamented the impact of state taxes on her earnings. “It sucks to be taxed! That’s why we love cash tips!” Teal remarked, expressing hope that Hochul might reconsider her stance on the tax policy.
The issue of affordability has emerged as a central theme in recent political discussions, especially with the election of democratic socialist Mayor-elect Zohran Mamdani. While Mamdani has advocated for measures like “inflation refund checks,” he has not pushed for matching Trump’s tip and overtime deductions, despite the proposal from state Senator George Borrello.
Tatiana Cruz, a bartender at Teddy’s in Williamsburg, noted that taxation cuts into her earnings significantly. “I think every restaurant should pay servers livable wages, so we don’t have to depend on tips,” she stated.
John Winterman, owner of Francie restaurant in Williamsburg, argued that if the state provided tax breaks to restaurants, they would be better positioned to pay their employees. “If not working to help restaurants get the tax breaks they need, it’s an uphill battle for us,” he said.
The ongoing frustration among service workers has drawn attention from political figures. Scott Bessent, former Treasury Secretary under Trump, accused New York and other states of “political obstructionism” for blocking the tax benefits. “This partisan stonewalling is a direct assault on the very families and workers liberal politicians claim to champion,” he asserted.
Republican gubernatorial candidate Bruce Blakeman also weighed in, criticizing Hochul for denying tax relief to the service industry. “Kathy Hochul is sticking it to the service industry by blocking real tax relief on tips and overtime,” he stated, noting that the lack of action could cost servers up to $3,000 annually.
In response to the backlash, a spokesperson for Hochul indicated that the administration would continue exploring ways to provide financial relief to New Yorkers while evaluating federal changes in the context of the upcoming budget.
The current situation underscores the ongoing struggle of service workers in New York, who face rising costs of living and depend on tips to make ends meet. The future of tax relief for these workers remains to be seen, but the call for action is clear.
