WeVote
Log In

Bill

Bill

SB 1255

An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in personal income tax, further providing for classes of income and providing for exclusion of tips from taxable income.

2025-2026 Regular Session Introduced by Lisa Baker and 11 co-sponsors

Pennsylvania bill would exclude tips from state income tax, reducing taxes on service workers but potentially decreasing state revenue with unclear implementation details.

Referred to Finance
0
WeVote Research Nonpartisan
Bill Summary · SB 1255

Legislative bill overview

SB 1255 proposes to amend Pennsylvania's Tax Reform Code of 1971 by excluding tips from taxable income for personal income tax purposes. This would create a new class of income with special tax treatment, removing tipped income from state tax calculations while federal taxes would likely still apply.

Why is this important

Pennsylvania currently taxes tips as ordinary income, and this change would reduce state tax burden on service workers in restaurants, hotels, and similar industries. The practical impact depends on implementation details—whether this applies to all tips, tips reported to employers, or tips claimed on tax returns—which could significantly affect both worker take-home pay and state revenue.

Potential points of contention

  • Revenue impact: Excluding tips from state taxation reduces Pennsylvania's personal income tax revenue with no identified offset or funding mechanism
  • Equity concerns: The benefit flows primarily to service industry workers, while other lower-wage workers without tip income receive no similar exclusion
  • Definition and enforcement: The bill doesn't specify how tips are defined or verified for tax purposes, creating potential administrative challenges and tax avoidance opportunities
  • Federal-state alignment: Pennsylvania would tax differently than federal law, complicating compliance and potentially creating filing inconsistencies

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.