Wisconsin $2.7 Billion Tax Cut Could Save a Waiter $716 Per Year

A Forward Analytics report released October 15, 2026, projects Wisconsin would forgo $2.7 billion in income-tax revenue from 2028 through 2037 if the state exempted tips and overtime pay. The estimate covers ten years.

The lost revenue would equal tax savings for taxpayers who qualify, averaging about $270 million annually. Jacob Anderson, a research analyst at the organization, described the state’s loss and taxpayers’ gain as two sides of the same policy.

“However, that would be the same amount that would be an income tax cut, so money going back to Wisconsinites.”

The proposal is not current state law. Lawmakers and the governor would need to approve a change before Wisconsin stopped taxing the eligible income.

The savings depend on how workers earn their pay

The report illustrates the difference with two people earning the same annual amount. A waiter earning $40,000, including $15,000 in tips, would save about $716 per year in state income tax.

An office worker with $40,000 in wages and no tips would get no reduction under the tips provision. The overtime exemption could apply to workers with qualifying overtime pay, but regular wages alone would not create a benefit from exempting tips.

Some workers would see little or no savings. Many low-income residents already owe no Wisconsin income tax, leaving them with little tax liability to reduce.

The proposal’s benefits therefore would vary by income source and existing tax owed. A tipped worker could receive a direct reduction, while an otherwise similarly paid employee without tips would not benefit from that part of the plan.

Tiffany pairs the exemption with a broader income-tax pledge

Republican gubernatorial nominee Tom Tiffany has made the tax proposal part of his 2026 campaign platform. Tiffany, the U.S. representative for Wisconsin’s 7th Congressional District, has called for eliminating state taxes on tips and overtime.

In an interview on October 14, 2026, he said his first budget would also cut income taxes by 10% for taxpayers earning $150,000 or less. He said the plan would return the state budget surplus to residents.

“We’re going to return all of this budget surplus to the people, every dollar of it.”

Tiffany also said he would oppose raising other taxes, including the sales tax, to make up for the income-tax reductions. The proposal combines the targeted exemption with a broader cut for taxpayers within the income limit.

In another interview, he tied that platform to the state’s surplus and property taxes:

“That’s the first thing we should do, return that $3 billion budget surplus and the 400 year property tax increase, do a 10% middle class income tax cut and then no taxes on tips and overtime, just like we did federally.”

He has characterized the exemption as a way to put money in working people’s pockets and help drive Wisconsin’s economy.

The federal policy Tiffany cites is a deduction, not a full exemption

Tiffany has pointed to federal tax changes enacted in 2025 as a model. Under that law, workers can deduct up to $25,000 in reported tips and up to $12,500 of qualifying overtime pay through 2028.

Those deductions phase down for higher-income taxpayers. They reduce taxable income rather than eliminate all tax liability on tips or overtime.

Wisconsin’s proposal would address state income taxes separately. The state continues to tax qualifying tips and overtime unless its lawmakers approve a separate exemption. The federal provisions do not themselves change Wisconsin’s tax treatment.

The state budget would lose what qualifying taxpayers save

The report treats the projected revenue reduction as the same amount that eligible taxpayers would keep. That would leave the state with less income-tax revenue over the decade, while directing the equivalent sum to taxpayers who qualify.

The estimate also highlights why the headline amount does not represent an equal payment to every worker. Some residents would receive savings on tips or qualifying overtime; workers without those earnings would not gain from those exemptions, and people who owe no state income tax have little or no liability to reduce.

Tiffany has also referred to returning a $3 billion budget surplus and to a “400 year property tax increase” in describing his priorities. His proposed income-tax changes would require action by the Wisconsin Legislature and approval by the governor before they could take effect.