Surprisingly, the U.S. Senate Unanimously Passed the No Tax on Tips Bill

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The United States Senate passed a bill eliminating federal income taxes on tip earnings and moved President Trump’s “No Tax on Tips” campaign promise one step closer to becoming law. The bill, initially brought forward by Sen. Jacky Rosen (D-Nev.), cleared the Senate floor Tuesday under unanimous consent. Although Democrats were expected to block the measure, they surprisingly stood down, which resulted in a rare moment of bipartisan unity.

The bill’s passage came as a surprise to many. Rosen introduced it as a symbolic gesture to highlight rising living costs faced by hospitality workers. However, Sen. Ted Cruz (R-Texas) quickly endorsed it, crediting Trump’s campaign push and calling the move “political genius.” The bill now heads to the House, where it could be passed as a stand-alone measure or wrapped into the broader “One Big Beautiful Bill” tax package currently under negotiation.

How the No Tax on Tips Law Would Work

Under the proposed legislation, tip income would be exempt from federal income taxes up to $25,000. Workers would still report tip earnings, but could subtract them from taxable income as an “above the line” deduction. Doing so will result in lower adjusted gross income, which determines how much federal tax is owed.

More importantly, tip income would still be used to calculate payroll taxes, including Medicare and Social Security contributions. The bill also mandates that the Treasury Department publish a list of job categories that qualify as tipped work within 90 days of enactment.

The income cap for eligible workers is set at $160,000 per year. This ensures the benefit is targeted to middle-income service workers and not high earners. Though the deduction is substantial, it’s not automatic. Employees must still document their tips and report them correctly.

How Many Americans Would Benefit from the No Tax on Tips Bill

There are an estimated 2 million tipped workers in the restaurant industry alone, including servers, bartenders, baristas, and delivery drivers. Nevada, where Rosen and her colleague Sen. Catherine Cortez Masto (D-Nev.) both pushed hard for the bill, has the highest number of tipped workers per capita in the country. Rosen noted that about 25% of Nevada’s workforce depends on tips as part of their income.

Nationwide, tipped work also spans the beauty, hospitality, and transportation sectors. These industries are hit hard by inflation and pandemic-era disruptions and have seen high employee turnover. Supporters of the bill argue that eliminating taxes on tips could help workers retain more of their earnings while making their jobs more attractive.

Criticism From Labor Advocates and Economists

Despite the Senate’s unanimous vote, the bill does not lack critics. Labor researchers from the Brookings Institution point out that 37% of tipped workers already pay no federal income tax due to their low earnings. Others argue that removing tax obligations could encourage employers to lean more heavily on tipping instead of raising base wages.

Some labor advocates see the move as a distraction from more impactful reforms, such as ending the sub-minimum wage for tipped workers. Lena Simet, a senior researcher at Human Rights Watch, warned that while tips supplement wages, they should not substitute for stable earnings. “Without a guaranteed wage floor, workers remain vulnerable,” she said.

Will the House Move the No Tax on Tips Bill Forward?

The No Tax on Tips Act now enters the House of Representatives, where Republicans have multiple avenues to move it forward. The House version of the GOP’s “One Big Beautiful Bill” tax plan includes the same tip deduction provision. That megabill also contains Trump-backed changes like increasing the child tax credit, ending taxes on overtime pay, and expanding the deduction for U.S.-made car loans.

If passed in the House, the final bill could take effect in 2026 and last through 2028. Sen. Cruz said he believed “with near certainty” that the No Tax on Tips provision would become law, whether as a stand-alone or as part of the larger tax bill. The inclusion of bipartisan support in the Senate increases pressure on House Democrats to back the provision or risk being seen as standing in the way of relief for service workers.

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