Virginia Gov. Youngkin, Echoing Trump, Proposes No State Tax on Tips

The Washington Post · Laura Vozzella

13:07 JST, December 17, 2024

RICHMOND – Gov. Glenn Youngkin wants to make Virginia the first state to exempt tips from income taxes, borrowing an idea that President-elect Donald Trump proposed on the federal level as he appealed to working-class voters.

Youngkin (R) appeared at McLean’s Restaurant on Monday morning, at times sporting a red apron and filling customers’ coffee cups, to announce a plan to lift state taxes on tips earned by wait staff, hair stylists, bellhops and many other service workers. The change would cost the state about $70 million a year in lost revenue, he said.

“This is a great way for us to make sure that the tips that all of you leave this morning for this hardworking, amazing group of people who make this establishment so special, that they get that money in their pocket, not the government’s,” Youngkin told breakfast diners.

The proposal is part of a larger budget bill that Youngkin will unveil Wednesday to the General Assembly money committees. He has been highlighting certain features of his spending plan – including an attention-grabbing initiative to withhold police and jail funding from “sanctuary cities” that do not cooperate with federal immigration authorities – with near-daily news releases and in-person events.

All of Youngkin’s proposals will be rolled into a bill suggesting midpoint adjustments to the two-year budget that he and the General Assembly agreed to in May. The state House and Senate, both narrowly controlled by Democrats, would have to adopt Youngkin’s tax break for it to take effect.

Legislators will consider the plan when they convene for a 46-day session on Jan. 8.

Trump first proposed eliminating federal taxes on tipped income in June as he appealed to service workers in Nevada; his Democratic opponent, Vice President Kamala Harris, got on board with the idea two months later.

Leading Democrats said they need more details about Youngkin’s plan but were not opposed to a tax break for service workers.

“Any idea that’s going to put money back into the pockets of hardworking Virginians, we’re going to strongly consider and take a hard look at,” House Speaker Don Scott (D-Portsmouth) said before adding a skeptical note about Youngkin’s budget plan as a whole.

“We’ve got to take a look at all of the things. I mean, every day he drops something new that’s, you know, shoot first, aim later kind of stuff,” he said. “We just want to make sure that we’re not just doing things for the front page of the paper, but we’re doing things that are responsible.”

Senate Majority Leader Scott A. Surovell (D-Fairfax) sounded even more dubious, referring to the $5 billion in tax cuts and one-time rebates that Youngkin has already won since taking office.

“Governor Youngkin’s addiction to tax cuts has now developed into flat out pandering and gimmicks,” Surovell said in a text message to The Washington Post.

Surovell , an attorney, also raised concerns that well-paid professionals might find a way to qualify for the tax break.

“I [will] require all of my legal clients to pay me with tips if we pass this,” he joked before noting a serious concern: “some analysts suggest private equity/investment banks could take advantage of it.”

Youngkin has had a mixed record on tax cuts with the General Assembly, which Democrats have partly or fully controlled since he took office in January 2022. In his first year as governor, he won $4 billion in tax cuts, including the elimination of a 1.5 percent statewide tax on groceries and big increases in the standard deduction for personal income tax.

Youngkin sought $1 billion more in recurring tax cuts a year later, including reductions in corporate and top individual tax rates. But the General Assembly rebuffed him, passing one-time tax rebates for about that amount instead.

Last year, Youngkin sought to cut personal income taxes and expand the sales tax to cover digital consumer goods. Ultimately, the General Assembly did neither.

Lt. Gov. Winsome Earle-Sears (R) and a handful of Republican legislators joined Youngkin at the restaurant, some of them waiting tables alongside the governor. Earle-Sears, so far the only Republican running in next year’s election to succeed the term-limited governor, said the measure would help people “fatigued from inflation.”

“This should be a no-brainer for the General Assembly,” she said. “If we get it through, we will be the first state in the nation to do so. Let’s get to it.”

The plan sounded good to Elaine Cunningham, 40, a mother of four, who has worked at the diner for more than 10 years. She said she makes the majority of her income from tips, which supplement the $4 an hour McLean’s pays her.

“That’s really, really good news for all of us,” she said.

Youngkin’s office said an estimated 250,000 Virginians could benefit from the policy, which the governor said the state can afford because its economy is “roaring.”