Tips and overtime pay would be exempt from state income tax under Legislative proposals

Overtime pay and tips would be exempt from state income taxes under proposals discussed in the Nebraska Legislature Friday afternoon.

The Revenue Committee considered several income tax exemption bills from Sen. Danielle Conrad. One of her bills, LB28, would exempt tips from state income taxes, something President Donald Trump has vowed to do on the federal level. The other, LB30, would would make overtime pay exempt.

Conrad said she appreciated how both major presidential candidates in last year's election talked about getting rid of taxes on tips, focusing the tax debate on the plight of working families. She said Trump has stayed "true to his word" by continuing to advocate for the policy.

"If this committee hearing were to extend to midnight, I don't think that would allow me enough time to catalog my disagreements with President Trump, but I do commend him for lifting up these issues to shift the focus and the debate and the dialogue in how to ensure more equity for working people in our tax code," she said.

Conrad acknowledged that tax policy experts from both sides of the political spectrum are against her bills, but she said polling indicates a majority of Democrats and Republicans are in favor of the policies.

“While polling and public sentiment can't be the only impetus for our policy making, it also shows me what I know in talking to people in my district, that working families are crying out for some sort of relief," she said.

Representatives from unions for state employees, electrical workers and railroad workers testified in favor of Conrad’s proposal to end taxes on overtime pay.

There were no in-person opponent testifiers, but other senators on the committee said they were concerned the bills would unfairly benefit certain industries over others.

For example, servers who make a majority of their income from tips would pay almost no income tax, while salaried workers making similar money would receive no such exemption.

Conrad said she understood the concerns, but hopes to keep the measures alive in case changes are made at the federal level.

“Perhaps these proposals are not the right proposals to move forward, but I do think they have incredible merit, and I do think perhaps we can find some threads to help us build some common ground," she said.

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