Dozens of Democrat-led states still taxing tips, overtime and Social Security a year after Trumps One Big Beautiful Bill became law

WASHINGTON — President Trump’s One Big Beautiful Bill promised Americans bigger paychecks by eliminating federal taxes on tips, overtime pay, and other income – but many Democrat-run states have chosen to keep collecting anyway. The refusal of blue states to follow the federal government’s lead has resulted in a patchwork of tax laws across the country that has left waitresses, bartenders, retirees, and hourly workers with very different bills depending on their ZIP code. The Post analyzed state tax laws to determine where Americans have struggled the most to reap the full benefit of President Trump’s signature legislative victory.The biggest offenders are Connecticut, Minnesota, New Mexico, Rhode Island, and Vermont.Those states tax every major source of income covered by the law, which Trump signed on July 4, 2025.The quintet not only impose some of the highest state tax burdens on income Congress worked to make tax-free but also refuse to participate in the Education Freedom Tax Credit program created by the landmark legislation.Other states, such as New York, have taken a more gradual approach, adopting some of the federal tax breaks while rejecting others.As of this month, 31 states and Washington, DC, still tax tips. Workers in states that chose to decouple from the deduction could be losing up to 10% of their tips due to state-level taxes.

Minnesota — a state that levies a “progressive individual income tax” — enforces taxes ranging from 5.35% to 9.85%.If a Minnesota server makes $70,000 a year — $25,000 of that coming from tips — they are subject to a 6.8% individual tax rate.The server loses an estimated $1,700 of their tips, due to the state declining to conform to the federal tax break.Meanwhile, New Mexico continues to tax tips despite raking in revenue from the oil and gas industry, the state’s restaurant association fumed. “Continuing to tax tips is out of step with the needs of service workers, and underscores a broade...