One Fair Wage 2026: Who's Really Ending the Tip Credit

This article is for general information only. It summarizes wage rules and tax provisions in effect as of August 2026 and is not tax or legal advice. Wage rates change, city ordinances can set higher floors than the state, and any dollar figure here is an estimate. Verify your own situation against the linked primary sources or your state labor department before acting on it.

One Fair Wage, the national advocacy group, announced a $25 million campaign in February 2022 to end the subminimum tipped wage in 25 states by 2026, timed to the country’s 250th anniversary. It is now August 2026. The count is seven states. It has been seven states since 2014.

That does not mean nothing happened this year. A mountain town of 77,000 people finished a phase-out voters started a decade ago. Three of the highest-profile jurisdictions in the movement moved in the opposite direction, and two of them did it in the last twelve months. Meanwhile the question a working server actually cares about, whether a full cash wage puts more money in your pocket, has a more interesting answer than either side of the argument likes to give.

One terminology note before the scoreboard. “One fair wage” in lowercase describes a wage model where employers pay the full minimum wage in cash before a single tip is counted. One Fair Wage in capitals is the organization campaigning for it. This piece uses both, and they mean different things.

The Seven States Where the Tip Credit Is Already Banned

In these seven states, your employer owes you the full state minimum wage in cash for every hour worked. Tips sit on top. There is no tip credit, no make-up pay math, and no arithmetic your employer has to get right for you to hit the floor.

State	2026 cash wage owed before tips	Effective
Washington	$17.13	Jan 1, 2026
California	$16.90	Jan 1, 2026
Oregon (Portland metro)	$16.80	Jul 1, 2026
Oregon (standard)	$15.55	Jul 1, 2026
Oregon (non-urban counties)	$14.55	Jul 1, 2026
Alaska	$14.00	Jul 1, 2026
Nevada	$12.00	Jul 1, 2024 (unchanged)
Minnesota	$11.41	Jan 1, 2026
Montana	$10.85	Jan 1, 2026

Three rows in that table need context.

Alaska and Oregon changed on July 1, not January 1. Alaska went from $13.00 to $14.00 under Ballot Measure 1, with another step to $15.00 scheduled for July 1, 2027 and annual CPI indexing resuming in January 2028. Oregon’s three regional rates also reset on July 1, 2026 and hold through June 2027. If you find a chart showing Alaska at $13.00, it is stale.

Nevada is the outlier. Its $12.00 has not moved since July 1, 2024, and unlike the other six it carries no automatic CPI indexing. A guaranteed $12.00 in cash still lands under several tip-credit states’ combined cash-plus-credit minimums. “No tip credit” and “highest floor” are two different claims.

Hawaii gets miscounted as an eighth state. It is not one. Hawaii allows a narrow tip credit, currently $1.25 an hour against a $16.00 minimum wage, and only when the employee’s cash wage plus tips comes to at least $7.00 an hour more than the minimum. For every other state’s cash wage and credit, see our full tipped minimum wage by state chart for 2026, or run your own numbers through the tipped minimum wage by state tool.

Flagstaff Was the Only Place That Eliminated the Tip Credit in 2026

On January 1, 2026, Flagstaff, Arizona set a single minimum wage of $18.35 an hour for every employee, tipped or not. There is no separate tipped rate anymore.

The backstory matters more than the number. Flagstaff voters passed Proposition 414, “The Minimum Wage Act,” at the 2016 general election. Rather than killing the tip credit outright, it shaved the credit down a little every year for a decade, and 2026 is the year the arithmetic finally hit zero. The rate is CPI-indexed every January 1 from here.

For contrast, statewide Arizona went to $15.15 on January 1, 2026 and still allows a $3.00 per hour tip credit, so a tipped worker in Phoenix can be paid $12.15 in cash while one two hours north is paid $18.35. Same state, $6.20 an hour apart.

The National Employment Law Project calls this “the final step in the decade-long gradual elimination of its subminimum tipped wage.” That is the template that worked: a local ballot measure, a runway long enough that nobody could claim shock, and no legislative body positioned to undo it. Take away any one of those pieces and you get the three stories below.

The Reversals: Chicago, Michigan, and Washington, DC

Every jurisdiction that made national news for tip credit policy this cycle made it by slowing down.

Jurisdiction	Original plan	Where it stands now
Chicago	Tip credit to zero by July 1, 2028	Paused May 20, 2026; credit frozen at 24%, elimination pushed to 2030 / 2033
Michigan	Court-ordered phase-out to full parity by 2030	SB 8 caps the tipped wage at 50% of minimum in 2031, permanently
Washington, DC	Parity by 2027 under Initiative 82	Held at $10 through June 2026, now 56% of minimum ($10.30); ceiling lowered to 75% by 2034

Chicago paused a phase-out that was already half done

Chicago’s 2023 One Fair Wage Ordinance cut the tip credit eight percentage points a year, aiming at zero by July 1, 2028. It got as far as 24%.

On May 20, 2026, the City Council voted near-unanimously to pause the schedule for two years. The tip credit stays at 24%, which works out to $3.98 an hour against the city’s $16.60 minimum wage, leaving a $12.62 tipped cash wage. The reduction to 16% that was set for July 1, 2026 never took effect.

Under the revised ordinance, full elimination is pushed to 2030 for employers with 21 or more employees and 2033 for employers with 3 to 21, according to legal summaries from Ogletree Deakins and the National Law Review. Some secondary coverage cites 2028 and 2030 instead; the law firm analyses of the enacted text give 2030 and 2033. Either way, Chicago now has the longest live tip credit phase-out in the country.

Michigan capped its tipped wage at half of minimum, permanently

Michigan’s path ran through the courts. On July 31, 2024, the state Supreme Court’s Mothering Justice decision struck down the Legislature’s 2018 adopt-and-amend maneuver and reinstated a wage schedule that, as the court later clarified, would have eliminated the tip credit entirely by 2030. Senate Bill 8, signed by Governor Whitmer on February 21, 2025, replaced that outcome with a schedule that stops well short of parity.

For 2026 the tipped wage is 40% of the state minimum, which is $5.49 against a $13.73 minimum wage. It rises two percentage points a year: 42% in 2027, 44% in 2028, 46% in 2029, 48% in 2030, and 50% in 2031. Then it stops. There is no step after that, and parity is off the table absent new legislation.

One Fair Wage responded with a “Voters to Stop Pay Cuts” referendum drive aimed at the 2026 ballot. The campaign needed more than 223,000 valid signatures and never turned any in. It was suspended in March 2026, and the group said it would come back to the issue in the 2028 cycle.

DC did not repeal Initiative 82, it stretched it

Initiative 82 passed with 74% of the vote in 2022 and was written to reach parity with the standard DC minimum wage by 2027. It is still on the books. It has also been slowed twice.

On June 3, 2025, the Council passed emergency legislation pausing the July 1, 2025 step that would have taken the tipped wage from $10 to $12. Mayor Bowser’s FY26 budget proposed full repeal. The Council rejected that and voted 7 to 5 in July 2025 for a scaled-back version instead. The tipped wage held at $10 until July 1, 2026, when it moved to 56% of the DC minimum wage, which works out to $10.30 against an $18.40 minimum. It goes to 60% on July 1, 2028, then rises five points every two years until it reaches 75% on July 1, 2034.

Voters approved a path to 100%. The ceiling is now 75%. That gap is the whole pattern in one number: ballot measures pass, then legislatures and councils renegotiate them.

What a Full Cash Wage Actually Does to Your Take-Home

This is the part the compliance blogs skip. Suppose your state did kill the tip credit tomorrow. Four things would change, and they do not all point the same direction.

Your floor rises, and your worst shifts stop being catastrophic

A dead Tuesday lunch in Washington state pays $17.13 an hour no matter what happens in your section. The same shift in a $2.13 state pays $7.25 after make-up pay, and only if your employer runs the make-up math correctly for that workweek. If they get it wrong, you eat it, which is exactly how people end up with a paycheck that reads zero.

Overtime gets cleaner too. In a no-tip-credit state your overtime rate is computed off a real cash wage rather than a wage plus a credit, which removes the single most common source of underpayment for tipped workers on overtime.

The poverty numbers lean hard in one direction. The Economic Policy Institute puts the poverty rate for tipped workers at 12.8% against 6.5% for non-tipped workers. It finds 18.5% of waitstaff and bartenders in poverty in states paying the $2.13 federal cash wage, against 11.1% in the seven states that pay the regular minimum wage before tips, a gap EPI describes as nearly 8 percentage points. The National Women’s Law Center reports 8.7% poverty for women tipped workers in one fair wage states versus 12.4% in $2.13 states.

Average tip percentages tend to run a little lower

Toast’s Q1 2026 data, drawn from about 171,000 restaurant locations as of March 31, 2026, puts the national average tip at 19.3% for full-service restaurants, 15.8% for quick service, and 18.8% across all restaurant types. California is the lowest-tipping state in the country at 17.3% overall and 17.7% at full service. Washington DC (17.5%) and Washington state (17.8%) come next. Delaware, a tip credit state, is highest at 22.1%.

Two caveats before anyone builds an argument on that. Toast’s figures exclude cash tips entirely, and correlation is doing a lot of work here: high-cash-wage states also tend to be high-price, high-cost-of-living markets. Industry-funded outlets cite this same data to argue against one fair wage laws. Worker-side outlets ignore it. The honest read is that the gap is small, measurable, and worth pricing out.

Size it for yourself. Two points of tip percentage on a $100 per hour sales pace is about $2 an hour. The cash wage difference between a $2.13 state and Washington’s $17.13 is $15 an hour. On the tipping rates Toast is actually reporting, the trade is not close.

More of your pay becomes ordinary wages, and the tip deduction cannot touch wages

Nobody writes about this one, and it is where the real money hides.

The OBBB qualified tip deduction lets eligible workers deduct up to $25,000 in qualified tips from federal income tax for tax years 2025 through 2028, with the MAGI phase-out starting at $150,000 single and $300,000 married filing jointly. The mechanics are in our no tax on tips guide, and you can model your own number with the no tax on tips calculator.

The deduction reaches qualified tips and nothing else. Hourly wages get no relief from it at all.

So when a state moves $10 an hour of your pay from the tip column to the wage column, that $10 leaves deduction-eligible territory and lands in fully taxable Box 1 wages. Social Security at 6.2% (to the $184,500 wage base in 2026) and Medicare at 1.45% apply on the wage side either way, so FICA is a wash. The income tax treatment is not.

A rough shape of it. A server working 2,000 hours a year in a $2.13 state books about $4,260 in hourly wages, so $30,000 in tips leaves the full $25,000 cap sheltered. Move the same job to Washington’s $17.13 and the mix inverts: $34,260 arrives as wages before a single tip is counted. Even if tips still came to $20,000, only $20,000 of it is deduction-eligible instead of the full $25,000. At the 12% rate, which runs to $50,400 for single filers in 2026, that $5,000 of lost shelter is roughly $600 in extra federal income tax against $30,000 more in guaranteed wages. The tax effect is real. It is nowhere near big enough to outweigh the wage, and no state legislature is accounting for it when they debate these bills.

Employers respond, and not always in ways that help you

The move to watch for is the service charge. When a restaurant swaps voluntary tipping for a mandatory service charge, that charge is legally a wage rather than a tip, so no tip credit applies to it and it does not qualify for the tip deduction either. Our breakdown of service charges versus tips covers what that does to your paycheck. Menu prices and schedules move too, and the schedule usually moves first, which means you feel it in the hours column long before you see it in the wage column.

If You Work in a Tip-Credit State, Here Is What Changed

Federally, nothing. The cash wage is still $2.13, the maximum tip credit is still $5.12, and the federal minimum wage is still $7.25. Those numbers have not moved since 1991. If you need the mechanics, see the tip credit explained.

The one detail worth repeating: the make-up rule is checked per workweek, not averaged across a pay period or a month. A great Saturday cannot legally paper over a Tuesday where your tips left you under the minimum.

What did change for 2026 is how tips get reported. Cash tips now appear on Form W-2 in Box 12 with code TP, and your Treasury Tipped Occupation Code shows up in new Box 14b. If your employer fills either one in wrong, your tip deduction is the thing at risk, so check your W-2 the week it arrives rather than the week you file.

Whichever model your state uses, do these:

Read the cash wage line on your stub. Not the gross. The hourly rate your employer is actually paying before tips.
Log cash tips, card tips, tip-outs, and hours per shift. Separately. Tip-outs reduce your qualified tips; hours are what the make-up math runs on.
Check your effective hourly against your state minimum every week. The tip credit calculator and the server hourly wage calculator both do this in under a minute, and our walkthrough on calculating your hourly wage with tips explains the math behind them.

This is the whole reason Server44 keeps cash tips, card tips, tip-outs, and hours as separate fields instead of one lump number. Under a tip credit you need the split to verify make-up pay. Under a full cash wage you need it to know how much of your income the $25,000 deduction can actually reach. Either way, the number your employer reports and the number you earned should match, and you cannot check that from memory.

What to Watch Next

Oklahoma already voted, and voted no. State Question 832 would have raised the state minimum wage to $12 in 2027, $13.50 in 2028, and $15 in 2029. It went to voters on June 16, 2026 and failed, with about 56% opposed. It did not address the tip credit directly, but a higher state floor would have raised the combined minimum for tipped workers there. Oklahoma stays on the federal $7.25 and $2.13.

Chicago’s 2030 and 2033 deadlines depend on a restart nobody has scheduled. Two years is a long time for a pause to harden into policy, and the same council that voted to slow the phase-out down will be the one deciding whether to start it again.

Nevada’s frozen $12.00 is the quiet story: no indexing, no legislative action since July 2024, and inflation doing what inflation does.

As of Ballotpedia’s tracking, there are no certified statewide tipped-wage ballot measures for November 2026, and One Fair Wage has said Michigan is a 2028 project. Whatever moves next will move through a legislature or a city council, and the last three times that happened, it moved backward.

If you want to see what any of this does to your own numbers, the fastest path is to track a few weeks of shifts and compare your real effective hourly against your state’s floor. Policy arguments stay abstract until you run them against your own stub.

References

Frequently Asked Questions

Which states have no tip credit in 2026?

Seven: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. Employers there must pay the full state minimum wage in cash before any tips. Flagstaff, Arizona joined them at the city level on January 1, 2026. Hawaii is sometimes miscounted as an eighth, but it allows a narrow tip credit.

Did any state eliminate the tip credit in 2026?

No state did. The only jurisdiction to eliminate it in 2026 was Flagstaff, Arizona, completing a phase-out that voters approved with Proposition 414 back in 2016. The state-level map is unchanged.

What happened to Chicago's One Fair Wage ordinance?

On May 20, 2026, the City Council voted near-unanimously to pause the phase-out for two years. The tip credit stays at 24% of the minimum wage (a $12.62 tipped wage against a $16.60 minimum), and the scheduled July 1, 2026 cut to 16% did not happen. Full elimination now lands in 2030 for employers with 21 or more employees and 2033 for employers with 3 to 21.

Why did Michigan roll back its tipped wage increase?

Senate Bill 8, signed February 21, 2025, replaced the court-ordered phase-out with a capped schedule. The tipped wage is 40% of the minimum wage in 2026 ($5.49 against $13.73) and climbs two points a year to 50% in 2031, where it stops. It will not reach parity with the full minimum wage.

Do servers make less in tips in states with no tip credit?

On average, slightly. Toast's Q1 2026 data puts the national average at 19.3% for full-service restaurants and 18.8% across all restaurant types, while California is the lowest-tipping state in the country at 17.3% overall, followed by Washington DC at 17.5% and Washington state at 17.8%. The guaranteed cash wage usually more than covers the gap, but the trade-off is real, and Toast's figures exclude cash tips.

Is the federal tipped minimum wage changing?

No. The federal cash wage is still $2.13 an hour with a maximum $5.12 tip credit against the $7.25 federal minimum wage. It has not changed since 1991, and no 2026 federal legislation altered it.

Does a full cash wage affect the no tax on tips deduction?

Yes, indirectly. The deduction covers up to $25,000 of qualified tips for tax years 2025 through 2028 and it does not cover hourly wages. When more of your pay arrives as an hourly cash wage and less as tips, a smaller share of your income is deduction-eligible.

What is Initiative 82 and is it still in effect?

Initiative 82 is the 2022 DC ballot measure that was meant to phase out the tipped wage by 2027. It was not repealed, but the Council paused it in June 2025 and then scaled it back. The tipped wage held at $10 until July 1, 2026, when it rose to 56% of the DC minimum wage, which is $10.30 against an $18.40 minimum. It then rises every two years to a ceiling of 75% of the minimum wage in 2034.