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HB 1400

No Tax on Tips Act

2025 Regular Session Introduced by Gabriel Acevero and 14 co-sponsors

Maryland bill exempts tip income from state income tax for service workers, reducing state revenue and potentially increasing net wages for hospitality employees.

Hearing 3/04 at 1:00 p.m. (Economic Matters)
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WeVote Research Nonpartisan
Bill Summary · HB 1400

Legislative bill overview

HB 1400 proposes to eliminate state income tax on tips earned by service workers in Maryland. The bill would exempt tip income from state taxable income calculations, reducing the tax burden on workers in hospitality, food service, and similar tipped positions. This aligns with federal policy, where tips have been proposed for federal tax exemption in recent legislative efforts.

Why is this important

Tipped workers often earn below minimum wage with tips constituting the majority of their income, making this a direct wage increase for a vulnerable workforce segment. The policy could affect state revenue collection and may influence worker retention in service industries facing staffing challenges. It also reflects ongoing debate about whether tips should be treated as earned income or voluntary gifts for tax purposes.

Potential points of contention

  • Revenue impact: Reducing taxable income decreases state tax revenue; fiscal analysis would determine the cost and whether it's offset elsewhere or absorbed through budget cuts
  • Equity concerns: Non-tipped workers may view this as preferential treatment; critics argue tax relief should apply broadly or be paired with wage increases rather than tax exemptions
  • Implementation complexity: Defining what qualifies as a "tip" versus other compensation, tracking tip income, and compliance mechanisms could create administrative challenges
  • Economic effectiveness: Unclear whether tax savings would be passed to workers or absorbed by employers; may not achieve intended wage benefit

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

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