The absence of a state-level tax exemption for tips has left many restaurant workers in New York frustrated, as Governor Kathy Hochul has not extended former President Donald Trump‘s “no tax on tips” policy to state income taxes. This decision has raised concerns among those in the service industry, who rely heavily on tips for their livelihoods.
Rion Gallagher, a bartender at The Blasket in Midtown, expressed his discontent on Friday. He emphasized that the lack of a tax exemption on tips significantly impacts workers’ ability to save and enjoy their lives. “If we weren’t taxed on our tips, we’d be able to save more, we’d enjoy life a little more,” Gallagher stated. The policy in question allows qualified service workers to deduct up to $12,500 of tip income annually on federal taxes, a provision included in Trump’s “One Big Beautiful Bill” passed by congressional Republicans earlier this year.
The tax break also applies to hourly workers, allowing for a deduction of $12,500 on overtime pay, which increases to $25,000 for married couples. These measures are effective for tax years from 2025 to 2028. Despite this federal relief, numerous states, including New York, have not aligned their tax policies accordingly, creating a financial strain for many service workers.
Zoe Kalodimos, a waitress at Embassy Diner in Bethpage, Long Island, criticized the state’s inaction. “It’s disgraceful. People live off of tips,” she remarked, noting that she loses approximately $1,000 a month on taxes from tips. Kalodimos highlighted the challenges of supporting her family as the eldest of five siblings, stating, “That’s my livelihood; that’s how I eat and feed my family.”
Longtime server Jackie Puttre echoed Kalodimos’s sentiment, questioning the motivations of state lawmakers. “Their hands are in everything, and finally they’re doing some good, but the state comes and screws you,” Puttre said. She also noted the significant role that tips play in the income of service workers.
Many workers have lamented the decline of cash transactions, which previously allowed them to avoid tax on tips. David Aju, a server at Anatoly 56 Greek Taverna, mentioned, “I get most tips from credit cards, so that means everything is getting taxed.”
Hannah Teal, who works at George and Jack’s Tap Room, reported earning only $40,000 after taxes last year. “It sucks to be taxed! That’s why we love cash tips!” she joked, revealing that she could have taken home an additional $3,000 if not for state taxes. Teal expressed hope that Hochul might reconsider her stance on the policy.
The issue has gained traction among New York Democrats, especially following the election of Mayor-elect Zohran Mamdani, who has been vocal about affordability measures, including “inflation refund checks” of up to $400. Despite this, Mamdani has not actively pursued matching Trump’s tax deductions for tips and overtime.
Tatiana Cruz, a bartender at Teddy’s in Williamsburg, shared her frustrations about taxation cutting into her earnings. “I think every restaurant should pay servers livable wages, so we don’t have to depend on tips,” she stated. Restaurant owner John Winterman argued that tax breaks for eateries would enable them to offer better pay to workers.
Concerns are mounting that without policy changes, wait staff may leave New York City in search of better opportunities elsewhere. Sammy Musovic, owner of Sojourn Social on the Upper East Side, warned that “Eighty percent of income comes from tips,” and the lack of tax relief would hinder the retention of employees.
The political implications of this issue have not gone unnoticed. Scott Bessent, former Treasury Secretary under Trump, criticized New York and other states for what he termed “political obstructionism,” claiming it deprives workers of essential benefits. Nassau County Executive and Republican gubernatorial candidate Bruce Blakeman has also weighed in, accusing Hochul of undermining the service industry. “Kathy Hochul is sticking it to the service industry by blocking real tax relief on tips and overtime,” Blakeman stated.
In response to these concerns, a spokesperson for Hochul’s office indicated that the administration is evaluating federal changes in the context of the upcoming budget. The spokesperson reiterated the commitment to finding ways to provide financial relief to New Yorkers.
As the debate over tax policy continues, the voices of New York’s service workers highlight the pressing need for change in an industry that has faced numerous challenges in recent years.
