U.S. Senate Passes No Tax on Tips Act to Assist Workers

Categories: Breaking NewsGovernment NewsNews

The hospitality industry relies heavily on tips, and the new legislation aims to support workers in this sector.

News Summary

The U.S. Senate has passed the No Tax on Tips Act, aimed at providing tax relief to workers earning tips. The legislation allows workers earning $160,000 or less to deduct up to $25,000 in reported cash tips. With bipartisan support, the bill aims to support the working-class, particularly in tipping-heavy industries. Critics express concerns about its effectiveness and potential employer exploitations. The Act now moves to the House for consideration, seeking to clarify eligibility and implementation amidst ongoing discussions about tax reform and workers’ rights.

Washington D.C. – The U.S. Senate has unanimously passed the No Tax on Tips Act, a significant piece of legislation aimed at providing financial relief to workers who earn tips. The bill was passed on Tuesday through a unanimous consent request initiated by Senator Jacky Rosen, a Democrat from Nevada.

Under the new legislation, eligible workers can claim a tax deduction of up to $25,000 on cash tips reported to their employers for payroll tax purposes. However, this deduction is limited to individuals earning $160,000 or less annually, with the threshold set to increase with inflation over time. The adjusted eligibility aims to target tax relief towards working-class families, particularly in industries where tipping is prevalent.

The bill was introduced by Senator Ted Cruz, a Republican from Texas, in January 2025. It received bipartisan support from other senators, including Rosen and fellow Nevada Senator Catherine Cortez Masto, illustrating a collective recognition of the importance of the tipped workforce, particularly in states like Nevada, which has the highest per capita number of tipped workers in the nation.

As the legislative discussion progressed, the idea of eliminating taxes on tips gained significant traction during the 2024 presidential campaign, garnering endorsements from prominent figures including President Donald Trump and former Vice President Kamala Harris. Their support highlighted a growing political consensus around the issue of taxation on tips, signaling its relevance in contemporary discussions about tax reform and workers’ rights.

The National Restaurant Association has publicly expressed support for the No Tax on Tips Act, noting its potential benefits for the restaurant and hospitality industries. However, the legislation has faced criticism from labor advocates and tax policy experts who have raised concerns about its effectiveness for low-paid workers. Critics suggest that many tipped employees already do not pay federal income taxes, which raises questions about whether the intended tax relief will reach those most in need.

Moreover, there are apprehensions regarding the potential for employers to exploit the legislation by reclassifying wages as tips to capitalize on tax savings. Such a move could undermine the financial stability of workers relying on fair wages, thus complicating the overall impact of the legislation.

The No Tax on Tips Act now advances to the House of Representatives for a vote, where it has been incorporated into a broader Republican tax and spending bill. Senator Rosen has expressed a preference for the legislation to be passed as a standalone measure, detached from contentious budget items that could threaten vital programs like Medicaid and food assistance.

Senate Minority Leader Chuck Schumer, a Democrat from New York, has endorsed the policy, asserting that it provides necessary tax relief for working Americans rather than benefiting the wealthy. Such statements indicate a general agreement on the importance of supporting lower-income workers within Congress.

The act also mandates that the U.S. Department of the Treasury publish a list of occupations traditionally associated with tipping within 90 days following its enactment. This provision aims to clarify eligibility and ensure proper implementation of the deduction.

However, it is noteworthy that the House version of the bill includes additional stipulations regarding social security numbers for individuals seeking the deduction, effectively excluding temporary and unauthorized immigrants. This difference may complicate negotiations as both chambers aim to reach a consensus on the legislation.

Despite the challenges posed by partisan divisions, both versions of the bill emphasize the need for bipartisan support. This suggests that, barring unforeseen obstacles, the No Tax on Tips Act may progress smoothly through Congress, potentially providing significant support to America’s tipped workforce.