HB1400, titled the “No Tax on Tips Act,” would change Maryland law in several related areas affecting restaurant and other tipped-service workers. It creates consumer-protection rules for food service facilities that add service fees, requiring prominent disclosure of the fee amount, its purpose, and whether it is passed directly to employees. A violation of those disclosure rules would be treated as an unfair, abusive, or deceptive trade practice under Maryland’s consumer protection law.
The bill also phases in higher state minimum wages and changes the treatment of tipped wages. It sets the State minimum wage at $15.00 beginning January 1, 2024, then increases it to $17.00 in 2027, $18.50 in early 2028, and $20.00 beginning July 1, 2028. For tipped employees, it reduces the allowable tip credit over time and eliminates the tip credit entirely beginning July 1, 2028, requiring employers to pay tipped workers at least the full State minimum wage directly. The bill also requires wage-statement regulations for restaurant employers using a tip credit, so employees can see the effective hourly tip rate for each pay period.
On the tax side, the bill would allow a subtraction from Maryland taxable income for “qualified tips” received during employment in tip-based occupations such as hospitality, food and beverage service, barbering, cosmetology, parking services, and custodial services. It also creates a temporary income tax credit for employers, available for tax years after December 31, 2026 and before January 1, 2029, equal to 50% of the difference between the minimum wage paid and the tip credit amount allowed, capped at $10,000 per year. The bill is contingent on passage and voter ratification of a separate constitutional amendment, and would take effect only after that amendment is adopted.
The overall sentiment reflected in the available materials is limited because there are no committee transcripts or recorded votes included here, but the bill’s sponsorship suggests support from a broad group of delegates. The measure appears designed to raise pay for tipped workers while also addressing transparency around service charges and preserving some employer tax relief during the transition period.
The main points of contention likely involve the elimination of the tip credit, the cost impact on restaurants and other service businesses, and whether the employer tax credit is sufficient to offset higher labor costs. Another likely issue is the bill’s consumer-fee disclosure requirements, which could affect pricing practices in the food service industry. Because the bill is tied to a constitutional amendment, its implementation also depends on voter approval, adding another layer of uncertainty.
HB1400 would amend Maryland’s Commercial Law, Labor and Employment, and Tax-General statutes. It adds a new consumer-protection provision governing service fees at food service facilities, revises the State minimum wage schedule, phases out the tip credit for tipped employees by July 1, 2028, requires new wage-statement disclosures for employers using a tip credit, and creates a subtraction for qualified tips plus a temporary employer income tax credit. It would materially affect restaurants, other food service businesses, tipped workers, and payroll/tax administration, but only if the related constitutional amendment is enacted and ratified.
Based on the bill text alone, the measure appears generally pro-worker and pro-transparency, with a policy goal of increasing take-home pay for tipped employees and making service fees clearer to consumers. The broad list of sponsors suggests a favorable posture among supporters. However, no committee testimony or vote record is provided here, so there is no direct evidence of opposition or final legislative consensus in the supplied materials.
The likely areas of dispute are the elimination of the tip credit, the rapid increase in the minimum wage, and the effect on restaurant and hospitality employers’ labor costs. Business interests may object to the mandated wage changes, the administrative burden of new wage statements, and the consumer-disclosure requirements for service fees. Workers’ advocates may support the bill’s wage protections but could debate whether the temporary employer tax credit and phased timeline are adequate or whether the tip-credit phaseout should happen sooner.