(The Center Square) – As the Arizona legislative session kicks off on Monday, the Republican majority is pushing for no tax on tips.
House Bill 2081 would scrap the state income tax on cash tips retroactively from the last day of 2024.
“It’s part of our majority agenda,” House Speaker Steve Montenegro told The Center Square during a media availability on Monday.
“We’re gonna be working with the [presidential] administration wherever those things align. We’re excited for what President Trump is going to bring. He’s outlined his agenda. Here at the state level, we wanna make sure that we’re lining those two up.
“So we’re excited as those details will come as the session unfolds and the bill starts moving through the process,” he added.
The Grand Canyon State has a flat 2.5% income tax rate, which started in 2023 after it became law under the Ducey administration.
“For taxable years beginning from and after December 31, 2024, to the extent not already excluded from Arizona gross income under the internal revenue code, compensation received as cash tips during the taxable year that are reported to the employer” under federal law will not be taxed, the bill states. The legislation is sponsored by Rep. Gail Griffin and co-sponsored by Sen. David Gowan, as well as other House Republican lawmakers.
This comes as President-elect Donald Trump is hoping to fulfill a key campaign promise of ending taxes on tips through Congressional legislation.
It’s unclear if Gov. Katie Hobbs, a Democrat, would sign off on the legislation.