Blue-State Governors Block Trump’s Tip Tax Relief, Squeezing Working Families

Paul Riverbank, 12/11/2025Blue-state governors block tip tax relief, leaving service workers without promised pay increases.

Yet in places like Springfield, Albany, and the heart of Denver, the optimism didn’t quite filter through. Blue-state governors, faced with their own stretched budgets and balancing acts, weighed the federal decision and—so far—mostly declined to follow suit. That left plenty of workers feeling like they’d been promised something just out of reach.

In Illinois and New York, the old state tax on tips and overtime never budged. So while bartenders and bouncers in Houston got to keep the new break, their counterparts in Chicago and Brooklyn watched the numbers on their pay stubs barely move. One server outside Rochester told me she did the math every month, and the missing dollars—well, it meant holding off on a much-needed car repair.

Scott Bessent, Trump’s Treasury Secretary, didn’t mince words about it. In a recent press briefing, he accused state leaders of “deliberately blocking relief” and, in a flourish worthy of tabloid headlines, labeled them “the Grinches Who Stole Christmas.” Not exactly subtle—but his frustration mirrors what many tip-earning families have been feeling when they see headlines about a tax cut that hasn’t quite reached them.

Of course, from the perspective of state officials, there’s a simple—and unromantic—side to all this. Budgets in New York or Colorado aren’t written in daydreams; each tax dollar is allocated to everything from bus routes to school lunches. A staffer in Albany shrugged when I asked her to explain the standstill: “If someone shows me where the money comes from, I’ll show them a tax cut.” For now, the checkbook rules the discussion.

It has led to a kind of patchwork across the country. Some states—mainly those where the legislature automatically syncs with new federal tax rules (“rolling conformity,” as the accountants call it)—granted the break right away. Others are still tangled up in the details. Georgia, Maryland, South Carolina, all in limbo. Out west, Colorado let the tip exemption through, but blocked the overtime piece. Not every decision follows party lines, but the broader divide has grown sharper.

The result is that in neighboring cities, two workers can do the same job, pull the same hours, and come away with different take-home pay—one with a modest boost, the other with the status quo. With inflation nibbling at every dollar, those small differences show up as real choices: a few more gallons at the pump, a night out, an overdue bill that’s a little easier to pay.

Republican leaders have been swift to applaud the federal plan, casting it as a matter of working-class fairness. “Pro-family, pro-worker,” they call it. In turn, blue-state lawmakers stay mostly quiet, caught between fiscal responsibility and the risk of alienating a big swath of their own constituents.

It’s not hard to imagine this becoming a fixture in stump speeches soon enough. With an election around the corner, pressure is bound to build. Do state leaders stick with cautious budgets, or will mounting frustration from tip-earners force their hand?

There’s rarely an easy answer when politics, policy, and people’s wallets collide. For now, that standoff means a Kansas City bartender sees more from every shift while a New York City server—just as busy, just as skilled—wonders when, or if, she’ll finally get her due.

It was supposed to be a banner year for millions of Americans who depend on tips—waiters, hair stylists, cabbies—people making it work shift to shift. With the passage of President Trump’s “No Tax on Tips” section inside last winter’s sprawling One Big Beautiful Bill, Washington sent a clear message: you’d finally get to pocket a little more of what you earn. The federal government cut its slice from those wads of ones and fives, offering real relief amid rising rent and stubborn grocery prices.Yet in places like Springfield, Albany, and the heart of Denver, the optimism didn’t quite filter through. Blue-state governors, faced with their own stretched budgets and balancing acts, weighed the federal decision and—so far—mostly declined to follow suit. That left plenty of workers feeling like they’d been promised something just out of reach.In Illinois and New York, the old state tax on tips and overtime never budged. So while bartenders and bouncers in Houston got to keep the new break, their counterparts in Chicago and Brooklyn watched the numbers on their pay stubs barely move. One server outside Rochester told me she did the math every month, and the missing dollars—well, it meant holding off on a much-needed car repair.Scott Bessent, Trump’s Treasury Secretary, didn’t mince words about it. In a recent press briefing, he accused state leaders of “deliberately blocking relief” and, in a flourish worthy of tabloid headlines, labeled them “the Grinches Who Stole Christmas.” Not exactly subtle—but his frustration mirrors what many tip-earning families have been feeling when they see headlines about a tax cut that hasn’t quite reached them.Of course, from the perspective of state officials, there’s a simple—and unromantic—side to all this. Budgets in New York or Colorado aren’t written in daydreams; each tax dollar is allocated to everything from bus routes to school lunches. A staffer in Albany shrugged when I asked her to explain the standstill: “If someone shows me where the money comes from, I’ll show them a tax cut.” For now, the checkbook rules the discussion.It has led to a kind of patchwork across the country. Some states—mainly those where the legislature automatically syncs with new federal tax rules (“rolling conformity,” as the accountants call it)—granted the break right away. Others are still tangled up in the details. Georgia, Maryland, South Carolina, all in limbo. Out west, Colorado let the tip exemption through, but blocked the overtime piece. Not every decision follows party lines, but the broader divide has grown sharper.The result is that in neighboring cities, two workers can do the same job, pull the same hours, and come away with different take-home pay—one with a modest boost, the other with the status quo. With inflation nibbling at every dollar, those small differences show up as real choices: a few more gallons at the pump, a night out, an overdue bill that’s a little easier to pay.Republican leaders have been swift to applaud the federal plan, casting it as a matter of working-class fairness. “Pro-family, pro-worker,” they call it. In turn, blue-state lawmakers stay mostly quiet, caught between fiscal responsibility and the risk of alienating a big swath of their own constituents.It’s not hard to imagine this becoming a fixture in stump speeches soon enough. With an election around the corner, pressure is bound to build. Do state leaders stick with cautious budgets, or will mounting frustration from tip-earners force their hand?There’s rarely an easy answer when politics, policy, and people’s wallets collide. For now, that standoff means a Kansas City bartender sees more from every shift while a New York City server—just as busy, just as skilled—wonders when, or if, she’ll finally get her due.