The Senate unexpectedly passed the “No Tax on Tips Act” on Tuesday, paving the way for President Donald Trump to make good on a 2024 campaign promise.
The bill, which was introduced by Sen. Ted Cruz (R-Texas) in January, could provide a tax deduction up to $25,000 for workers who receive tips and make under $160,000 annually (the latter number is subject to change due to inflation). It passed a vote of “unanimous consent,” meaning all senators, regardless of party, voted in favor of it. It still has to pass the House before it lands on Trump’s desk.
The Committee for a Responsible Federal Budget estimated that the piece of legislation could cost the government $150 billion to $250 billion between 2026 and 2035 if implemented.
“This legislation will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers, the very people who are living paycheck-to-paycheck,” Cruz said in a statement. “I urge my colleagues in the House to pass this important bill and send it to the President’s desk to be signed into law.”
There were a total of 8 co-sponsors of the bill, including two Nevada Democrats: Sens. Jacky Rosen and Catherine Cortez Masto.
In her remarks on Tuesday, Rosen urged Democrats to vote in favor of the bill.
“‘No tax on tips’ was one of President Trump’s key promises to the American people, which he unveiled in my state of Nevada. And, I am not afraid to embrace a good idea, wherever it comes from,” Rosen said.
Rosen also pointed to a larger GOP tax bill that wraps in components of the No Tax on Tips Act with other cuts that would impact the working class.
“The problem is that House Republicans have included a version of the No Tax on Tips Act in their bigger budget bill, a bill that cuts Medicaid, SNAP, and other programs families rely on to give more tax breaks for billionaires and the ultra-wealthy,” Rosen added. “We shouldn’t be forcing working families to choose between keeping their health care or keeping their tips, which is why we want this bipartisan bill on its own – on its own – not part of a harmful, extreme budget bill.”
Despite the unanimous vote on Tuesday, the bill still has its critics.
Politico reported that tax experts have said the elimination of taxes on tips won’t substantially improve tipped workers’ incomes, and may hinder their eligibility for Medicare and Social Security.
The Economic Policy Institute, a nonprofit think tank, previously said that eliminating taxes on tips could motivate employers not to raise wages, adding that the bill distracts from more beneficial strategies like increasing the minimum wage and getting rid of the subminimum wage for tipped workers.
