BILL — As the formation of W-2s floods mailboxes across the country and tax day approaches, a Senate bill aimed at restructuring Montana’s income tax system leaves service industry workers worried about their financial future. There is.
Senate Bill 399 is Passed in 2021 In addition to other changes to the system, the system will also require tips to be reported with state taxes.
“We always tip when we do something. When we stay at a hotel, we tip the room attendant,” Steve Warlich, owner of Stella’s Kitchen & Bakery, said Saturday. If you’re out and about, tip the bartender. You tip the waitress. Most people do. ”
Kelsey Boggs/MTN News
In service industries, workers often rely on tips to survive.
“Tipping seems to be the main reason I work here,” John Wand, a clerk at Stella’s, said Saturday.
SB399 has workers like Wando feeling anxious.
“I may have to find another job now,” said Wand, who has worked in the service industry for about 30 years.
The bill was introduced in 2021 by Sen. Greg Hartz, R-Polson.
“Tip income has always been taxed on the federal return, and Montana has excluded it,” Hertz said in a recent interview with MTN News. “Now it will be taxed in Montana.”
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Hertz said this is an attempt to level the playing field.
“If you work in the same establishment and you’re an untipped employee and the employee next to you is tipped, that employee probably doesn’t pay taxes on half or a third of their income. “It’s not fair to other employees. Taxes should be broad and fair for everyone. It’s just a matter of fairness,” Hertz said.
Senate Bill 399 includes several changes to the system.
“We follow the federal standard deduction. The federal level in 2024 will be $15,000 for a single person and about $30,000 for a married couple. So what this means is that in Montana, the first $15,000 or $30,000 That means every dollar of income would not be taxed at all.” And those levels were much lower in 2023…This bill would save many Montanans their income taxes. ” Hartz explained. I now have to pay taxes in Montana. And those are primarily low-income taxpayers. The bill also lowered Montana’s top tax rate to 6.5%. ”
The changes won’t take effect until the 2025 tax season, when taxes are due in 2024, but service industry workers like Wand are scrambling to figure out their financial future.
“I love working at Stella’s,” Wand said. “But if you hear that, you might have to get another job.”
Kelsey Boggs/MTN News
Wand was unhappy with the change, saying that at Stellar, tipped employees have always shared their tips with non-tipped employees.
“How can that be unfair? In fact, we tip the kitchen,” Wand said. “We share tips.”
Stella’s is part of the Clock Tower Inn, located at 2511 1st Ave N. Wahrlich is the owner of both Stella’s and the Clock Tower Inn and talked about the tip pool system he needs.
Kelsey Boggs/MTN News
“Our servers pay into a tip pool that is distributed to all non-tipped employees, and it’s all taxed,” Warlich said.
According to the Montana Free Press, the top tax rate in Montana is 5.9%. Service workers must pay an additional $5.90 in state taxes for every $100 in tip income. they report. Approximately 22,000 Montana taxpayers reported a total of $105.4 million in untaxed tip income in 2021. If that income was taxed at 5.9%, each taxpayer would pay an additional $279.
“We’re talking about $5 for $100 worth of tips. (It’s) probably somewhere between $20 and $80 per pay period,” Warlich said. “Honestly, that’s a lot of money.”
Mr. Hertz is SB399 It benefits Montana taxpayers and helps them save money.
“A lot of people are struggling right now. I mean, rent, food, fuel prices are big expense factors for everyone. And what we’re trying to do in Helena is reduce taxes. “So you have a little bit more money to live on and pay your bills. A lot of people are talking about what they think is a good economy. I know. But frankly, if you’ve been to the grocery store lately, you know that food prices have gone up significantly. And inflation is slowing. Despite this, prices have not fallen.”
Kelsey Boggs/MTN News
To learn more about the passage of Senate Bill 399, click here.
Click here to learn more about the changes being made to Montana’s income tax structure.
If you would like to know more about Stella’s Kitchen & Bakery, click here.
