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Bill

AB

Bill

A 5006

Excludes tips from gross income tax.

2024-2025 Regular Session Introduced by Al Barlas and 3 co-sponsors

New Jersey bill excludes tip income from state taxation, boosting service workers' take-home pay while reducing state tax revenue.

Introduced in the Assembly, Referred to Assembly Labor Committee
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Bill Summary · A 5006

Legislative bill overview

Bill A 5006 would exclude tips received by workers from gross income for New Jersey state income tax purposes. This means tip income would not be subject to state income taxation, though it may still be subject to federal income tax depending on federal law. The bill was recently introduced and referred to the Assembly Labor Committee.

Why is this important

Tips represent a significant portion of income for service industry workers, particularly in hospitality, food service, and transportation sectors. Excluding tips from state taxation could provide meaningful take-home income increases for these workers, though the fiscal impact on state revenues would need to be quantified. This touches on broader questions about tax policy, worker compensation, and whether service industry workers deserve preferential tax treatment.

Potential points of contention

  • Revenue impact: Excluding tips reduces state tax revenue; the bill does not specify how this $XX million annual loss would be offset or handled
  • Fairness across industries: Service workers would receive tax benefits that other wage earners would not, raising equity questions about why tips warrant special treatment
  • Federal-state coordination: Confusion could arise since tips remain federally taxable income, potentially complicating tax filing and IRS compliance for workers and employers
  • Implementation challenges: Questions about how to verify tip income and prevent abuse compared to reported wages and 1099 income

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

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