West Virginia treasurer calls for special session to eliminate taxes on tips, overtime

by Lori Kersey and Caity Coyne, West Virginia Watch
October 1, 2025

West Virginia State Treasurer Larry Pack on Tuesday called on Gov. Patrick Morrisey and state lawmakers to eliminate the state’s tax on overtime and tips. Pack asked officials to consider taking up the matter during a special legislative session.

“President Trump promised to abolish the tax on overtime pay and tips, a centerpiece for his tax policies,” Pack said in a news release. “The goal was to help blue-collar and service industry workers who often rely on overtime and tips to make ends meet. Combined with the extension of the 2017 Trump tax cuts, President Trump has delivered, and then some, by enacting some of the largest federal tax cuts in history.”

Pack also spoke about the proposal during an interview with Talkline on West Virginia MetroNews. 

The One Big Beautiful Bill Act, which Trump signed into law this summer, cut federal taxes on tips and overtime. According to the IRS, workers of certain occupations can deduct tips up to $25,000 annually during tax years 2025 through 2028.

Workers who receive overtime pay may also deduct the pay that exceeds their regular rate of pay — for example, the “half” in “time and a half” pay, up to $12,500 annually or $25,000 for joint filers. 

According to the Tax Policy Center, a joint venture of the nonpartisan Urban and Brookings institutes that aims to improve tax and fiscal policy, while the tax cuts are popular, few will actually benefit from them. 

Only about 3% of households will benefit from the deduction for tipped income in 2026. Their average benefit is $1,400, but the average for all households is $40, according to the center.

About 9% of workers will pay on average $1,400 less on their overtime as well, according to the Tax Policy Center. The average reduction for all households will be $130. 

In a statement Tuesday, Kelly Allen, director of the West Virginia Center on Budget and Policy, said the state should focus on policies that strengthen the economic security of all workers, but called eliminating the tax on overtime and tips a “gimmick.”

“These policies help employers — not workers — by pushing more sectors to move to tips, which lowers costs for businesses while reducing economic stability for workers and costing consumers more,” Allen said. “We are all frustrated by the increasing number of transactions in which we are encouraged to tip, and these policies only exacerbate the issue. 

“Similarly, no tax on overtime helps employers, not workers, by encouraging excessive hours of work and putting downward pressure on base wages,” she said. “Workers shouldn’t have to work more than 40 hours per week to provide for their families.”

Pack’s proposal to eliminate tips and overtime from the state income tax comes as the state is already grappling with a potentially rocky future financial outlook. While the state ended fiscal year 2025 with a revenue surplus, growing expenses — from the Public Employee Insurance Agency, the Hope Scholarship and potential federal budget cuts — could pose challenges.

The state is also still settling financially after implementing several cuts to personal income taxes in recent years. In 2024, according to the state budget office, West Virginia reported $826 million in surplus. 

Fiscal year 2025 ended in July, with the state reporting about $338 million in surplus, according to a news release from Morrisey. But most of that money was already spent and committed by the time the fiscal year ended due to supplemental appropriations passed in the 2025 regular session.

In an emailed response Tuesday regarding Pack’s request, Drew Galang, deputy press secretary for Morrisey, said the governor’s administration is “making the tough decisions to put our state in a great place to return money back to our people.

“We did the hard work of paying for the last set of tax cuts during the last legislative session and have begun to put our state on a solid long term financial trajectory,” Galang wrote. “This will position the governor and the Legislature to provide significant and broad based tax relief for West Virginians during the upcoming legislative session.”

YOU MAKE OUR WORK POSSIBLE.

SUPPORT

West Virginia Watch is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. West Virginia Watch maintains editorial independence. Contact Editor Leann Ray for questions: info@westvirginiawatch.com.