Connecticut Republicans Propose Exempting Tips and Overtime from State Income Tax

The proposal aims to ease affordability pressures for service industry workers in the state.

Feb. 27, 2026 at 8:36pm

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Some Connecticut Republicans are proposing that the state should stop taxing tips and overtime pay, mirroring a recent federal tax change that has already affected workers across the country. The lawmakers argue that this policy would allow service industry employees to keep more of the money they earn and help businesses struggling to fill shifts amid workforce shortages.

Why it matters

This proposal is part of a broader debate around affordability and tax relief in Connecticut. While Republicans see it as a commonsense way to support workers, Democrats have proposed a different approach focused on a refundable child tax credit funded by higher taxes on high-income residents.

The details

The actual text of the Republican bill is just 29 words, stating that the state's personal income tax should be amended to exempt tips and overtime pay. Supporters argue this would provide immediate relief to workers, while critics say the state can't afford to lose the estimated $126 million in annual tax revenue. The proposal has bipartisan implications, with the Democratic governor's office saying it will closely monitor the legislation as it moves forward.

  • The federal tax change exempting tips and overtime from income tax was passed under the Trump administration.
  • Connecticut Republicans unveiled their proposal at the state Capitol in Hartford on Friday, February 27, 2026.

The players

Rep. Joe Polletta

A Republican state representative from Watertown who supports the proposal, arguing it is a 'commonsense' way to help workers hit by inflation.

Vincent Candelora

The House Minority Leader, a Republican who says the policy could help employers fill critical staffing gaps in the state.

Rep. Jason Doucette

A Democratic state representative from Manchester who says his party's Tax Equity Caucus is looking at a different approach to affordability, such as a refundable child tax credit.

Michelle Nicholson

The owner of The Flour Girl Bakery and Cafe in Hebron, who testified in support of the proposal, saying it could make a meaningful difference for her business.

Shaelie Watrous

A special events manager at Nicholson's cafe, who said losing part of her tips to taxes takes away from what customers intend to give.

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What they’re saying

“Why not extend this benefit? It is the commonsense thing to do. This should not be a political issue. This is a commonsense issue. These are people that have been hit by inflation.”

— Rep. Joe Polletta

“We have a workforce shortage in the state of Connecticut. It's a problem. This kind of policy will keep us competitive for our workforce.”

— Vincent Candelora, House Minority Leader

“It's like them showing us love. And then if we do get taxed off of it, it's like taking away that love. It can be hard to pay bills and payments, especially in a high income or a high taxed area.”

— Shaelie Watrous, Special Events Manager

What’s next

The proposal will now advance through the legislative process, with the governor's office saying it will closely monitor the bill and work with lawmakers to deliver a balanced budget that addresses affordability and fiscal stability.

The takeaway

This debate highlights the ongoing tensions around tax policy and affordability in Connecticut, with Republicans and Democrats offering different approaches to supporting workers and families. The outcome could have significant implications for service industry employees and the state's fiscal health.