On January 16, 2025, Senator Ted Cruz (R-TX) reintroduced the bipartisan “No Tax on Tips Act,” aiming to exempt gratuities from federal income taxation. Co-sponsored by Democratic Senators Jacky Rosen and Catherine Cortez Masto of Nevada, along with Republican Senators Pete Ricketts of Nebraska and Steve Daines of Montana, the legislation seeks to amend the Internal Revenue Code of 1986 to eliminate income tax on qualified tips.
Senator Cruz emphasized the importance of this bill for American workers who rely on tips, stating, “American workers in many industries rely on tipped wages to make ends meet. Today, I’m introducing my bipartisan No Tax on Tips Act—legislation I authored to fulfill President Trump’s promise to end the wrongful practice of taxing voluntary tips.” He added, “I’ve long believed the GOP should be the party of bartenders, of waiters and waitresses, and this bill is an important step to ensure we are addressing the economic needs of working Americans.”
The proposal has garnered support from various stakeholders, including the National Restaurant Association, which stated that the act “would provide tipped workers an income tax credit for their tips,” unlike the Tipped Income Protection and Support (TIPS) Act, which would “limit the earning potential of servers; it will force operators to cut hours and jobs; and it will increase menu prices for consumers.”
However, some economists have raised concerns about potential unintended consequences. Howard Gleckman, a senior fellow at the Tax Policy Center, warned that the exemption could “pile onto the already unsustainable federal deficit, ding Social Security and Medicare, and open a tempting loophole for high …
The reintroduction of the “No Tax on Tips Act” reflects ongoing discussions about tax policy and its impact on American workers, particularly in the service and hospitality industries. As the legislative process unfolds, debates are expected to continue regarding the balance between providing financial relief to workers and maintaining fiscal responsibility.
