Wisconsin Eyes Tax Relief on Tips and Overtime Pay
Eligible workers could save money on state income taxes starting in 2028 under new proposals.
Updated on Oct. 23, 2026 in Taxes
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Should states eliminate income taxes on tips and overtime for workers?
Both Wisconsin gubernatorial candidates have committed to signing legislation that would eliminate state income taxes on tips and overtime pay. This proposal would provide $2.76 billion in tax savings to eligible workers between 2028 and 2037.
Why it matters
The proposed tax relief is designed to lower the effective tax burden for working families across Wisconsin by excluding specific income streams from annual taxable calculations. However, the policy would result in a projected $2.76 billion reduction in state revenue over a ten-year period.
The plan projects $2.76 billion in total tax savings for Wisconsin workers from 2028 through 2037. Individuals earning between $85,000 and $132,000 annually would see the largest tax benefit under this proposal.
The players
Tony Evers
The Governor of Wisconsin who previously vetoed a temporary tax-on-tips proposal.
Forward Analytics
An research organization that released a report on the state revenue impact of the proposed tax changes.
The details
Under this proposal, eligible taxpayers would exclude income earned from overtime hours and gratuities when calculating their annual state taxable income. Rather than seeing an immediate increase in net take-home pay on weekly paychecks, workers would realize these savings during the annual state tax filing process. The amount of individual relief will vary significantly based on the specific ratio of overtime or tip income relative to an employee's total annual earnings.
Timeline
April 2026: Governor Tony Evers vetoed a previous tax-on-tips proposal.
May 2026: A bipartisan budget surplus bill containing a tax elimination proposal failed in the legislature.
2028-2037: The projected timeframe for realized tax savings and state revenue loss.
Money Landscape
The proposal emerges as a significant policy debate within the context of Wisconsin's approximate $3 billion budget surplus. It follows multiple failed attempts earlier in 2026 to achieve bipartisan consensus on using those state funds for permanent tax relief.
Eligible households should note that these savings are projected to materialize through annual tax filings starting in 2028 rather than through immediate paycheck adjustments. You should consult a qualified tax professional to evaluate how your specific ratio of overtime or tip income might impact your future state tax liability.
The takeaway
The proposed policy highlights a shift toward using targeted tax exemptions for specific income types to provide relief to working families. Keep an eye on future legislative sessions for final details on eligibility requirements and filing procedures before the projected 2028 start date.
Further reading
For more information on state tax policy, visit the Taxes section.
Source note: This article includes information reported by Urban Milwaukee.
Live Poll
Should states eliminate income taxes on tips and overtime for workers?
