Making drinks is part of Sarah Albert’s job at Ocean Eddie’s in Virginia Beach.
But in the off-season, business can be slow. That’s why she says she’s glad to hear her tips could soon be tax-free.
“By the time we have to pay all of our tips and taxes, usually the industry down here at the oceanfront is way slower. So we’re paying more on the summertime wages and tips that we have made," said Albert.
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On Monday, Virginia Gov. Glenn Youngkin unveiled a budget proposal to exempt service tips from Virginia’s state income tax. The goal is to lower the cost of living for working families across the Commonwealth.
“We have delivered over $5 billion in tax relief to date, and we remain committed to lowering the cost of living for hardworking Virginians. It’s their money, not the government’s,” Youngkin said.
The money Albert would save by not paying taxes on tips would help with current and future expenses.
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“I am looking to go to law school, so I am saving up right now for that. It would help a lot more than that. It would help a lot more with Christmas gifts, buying for my family," Albert explained.
Ken Edmonds was enjoying a drink at Ocean Eddie’s Monday and said he’s all for eliminating taxes on tips.
“Taxing it just penalizes them, I think unnecessarily and I think it would encourage more employment," Edmonds said.
As News 3 has reported, employment is something many service industry businesses, like restaurants, are struggling with.
"Oh, yeah. Definitely, I would," Albert said when asked if she would consider working in the industry more if she were looking for a job if she knew her tips wouldn't be taxed.
News called and talked with the president of the Virginia Beach Restaurant Association about the governor’s proposal.
He supports it and believes it could help with employment. Virginia Restaurant, Lodging, & Travel Association CEO Eric Terry agrees.
“Workforce has been a real challenge for the restaurant industry coming out of the pandemic. So awe should see some real positive impact on workforce," Terry said.
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But on the flip side, some might say giving service industry workers a break is unfair when people in other industries don’t get a break.
"These are people who have probably never worked service industry before," Edmonds said. "I have worked food and beverage. I understand and I appreciate what is involved in working food and beverage."
“I can understand from both points of view. I would say, though, that, especially right now, when people are working an hourly wage they’re definitely getting a certain amount of money," Albert said. "We work and we don’t know what we’re getting. We’re grateful for whatever tips that we do get, and sometimes it doesn’t even go to minimum wage.”
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Fair or not, taking away the tax would also mean less money for the state. But Terry tells News 3 he doesn’t foresee that being a problem.
“The state’s in a very good position right now. They actually have considerable additional revenues this year than was originally anticipated. Talking about a time to do something like this, now is probably the right time," said Terry.
The Virginia Department of Taxation and the Virginia Employment Commission estimate that more than 250,000 Virginians in the food service, personal service, and hospitality industries could benefit from the proposed tax relief.
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Under the proposed plan, Virginians who earn tips will be able to claim a deduction on their state tax return, provided the income is included in their federal adjusted gross income.
The Department of Taxation will use IRS data and employer-reported W-2 information to ensure compliance.
The next step is for the governor to officially include his proposal in his budget, which lawmakers will take up in the new year.
