Servers in downtown Milwaukee say they might finally catch a break. On Monday, workers at 3rd Street Market Hall reacted to Gov. Tony Evers' new plan to wipe out state income taxes on cash tips and overtime pay, a proposal that targets the exact dollars many of them rely on to survive. In a city where every shift and every table can make or break the month, employees said the idea could loosen the paycheck-to-paycheck squeeze just a bit. The change is tucked into a broader bipartisan deal that also includes education funding and rebate checks, and it still needs the blessing of state lawmakers before anything hits paychecks or tax returns.
What Evers Put On The Table
In a joint announcement, Gov. Evers and Republican leaders detailed a compromise package that would scrap Wisconsin income tax on cash tips and overtime earnings and use surplus funds to send money back to taxpayers, according to the Office of the Governor. The plan calls for more than $600 million in K-12 funding, an increase in special-education reimbursements, and direct rebate checks of $300 for single filers and $600 for joint filers. The administration said the overtime exclusion would kick in with the 2026-27 tax year and that the entire package would be financed with a slice of the state surplus.
3rd Street Market Hall Workers Sound Off
At 3rd Street Market Hall, a downtown food hall that packs in nearly two dozen vendors, staffers did not exactly play it cool about the proposal, according to TMJ4. "Every dime count. We're always living check-to-check," Allante Mayon-Denson, manager at Goodland Greens, told TMJ4. Gareth Pyper, a longtime service-industry worker, said a recent change at the federal level had already made a noticeable difference. "The federal return for me this year was really, really good," he told TMJ4.
How The Federal Change Has Already Hit Paychecks
Workers like Pyper are already feeling the impact of the federal "no tax on tips and overtime" provisions that took effect in 2025, which let eligible tipped employees deduct qualified tip income and certain overtime amounts on their federal returns, the IRS explains. For tax year 2025, the IRS says employees in qualifying tipped occupations may be able to deduct up to $25,000 in qualified tips and up to $12,500 in qualified overtime compensation, with higher caps for joint filers, and the agency has issued transition guidance for both employers and workers. The IRS notes that the new deduction does not touch payroll taxes such as Social Security and Medicare, and that workers and payroll departments need careful recordkeeping if they want to claim it correctly.
What A State Copycat Move Would Mean Locally
Under the governor's proposal, Wisconsin would line up its treatment of tips and overtime with the federal approach and keep the state exclusions in place permanently, according to the governor's office. Administration officials project that excluding overtime from state income tax would save families roughly $328 million over the next two years, while the tip change would lower state income taxes for many lower and middle-income filers. Because this shift would require changes in state law, taxpayers would not see the impact on their Wisconsin returns until after the Legislature passes specific language and the governor signs it, according to the announcement.
What Happens Next At The Capitol
The bipartisan package was set to go before the powerful Joint Committee on Finance this week, with floor votes expected soon afterward, according to Spectrum News 1. Committee members could still tinker with the deal by adding or stripping provisions, and lawmakers have the final say on the bill's exact wording. If the package clears both chambers, leaders have signaled that the governor is ready to move quickly.
What Employers And Payroll Teams Need To Watch
Industry groups and payroll providers say the fine print will not be as simple as the headline sounds. Restaurants and bars will have to update systems that track and report tips and overtime so those amounts are documented correctly for withholding and deduction purposes, the National Restaurant Association has advised. Employers and payroll firms are being urged to coordinate now on reporting changes and help staff reconstruct 2025 tip and overtime totals that will be used when filing next year. For Milwaukee workers living check-to-check, employees said that even relatively small extra refunds from the state could stack up into real help with rent, groceries, and other household bills.
