The Senate has swiftly approved the No Tax on Tips Act in a unanimous vote, signalling strong bipartisan support for a policy designed to reduce the federal tax burden on cash tips earned by millions of American workers.
The legislation now awaits consideration in the House of Representatives, where its prospects remain promising given its wide appeal across party lines. This legislation follows political momentum that gained traction during President Donald Trump’s campaign, focusing on providing financial relief to service industry employees.
By exempting cash tips from federal income tax for eligible workers, the bill seeks to offer targeted support to a sector that has traditionally faced complicated tax liabilities.
Key Provisions of the No Tax on Tips Act
The No Tax on Tips Act, introduced by Senator Ted Cruz (R-Texas) and co-sponsored by a bipartisan group including Nevada Senators Jacky Rosen and Catherine Cortez Masto, proposes an amendment to the Internal Revenue Code.
The bill would create a federal income tax deduction of up to $25,000 annually for cash tips received by employees in occupations that traditionally receive tips, as specified by the Treasury Secretary within 90 days of the bill’s enactment.
Eligibility is limited to employees earning less than $160,000 per year, a threshold adjusted for inflation in future years, who also report their tips to employers for payroll tax withholding purposes.
The bill clarifies that cash tips include those received in cash, credit, debit card, or check forms. According to Senate Minority Leader Chuck Schumer (D-New York), this measure targets workers such as waiters, bartenders, and delivery drivers—groups that represent the majority of tipped employees.
Senator Rosen emphasised Nevada’s unique stake in the legislation, noting her state has the highest proportion of tipped workers per capita.
She described the bill as providing “immediate financial relief for countless hard-working families,” framing it as a bipartisan success. Senator Cruz added that the bill “will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers.”
Bipartisan Support and Implications for Future Legislation
The rapid and unanimous passage of the bill in the Senate was notable, achieved through a unanimous consent request—a parliamentary procedure often reserved for less contentious matters but rarely for significant tax legislation.
The absence of any objection among senators underscores the bill’s broad appeal despite ongoing partisan divisions.
In the House, Republican leaders are exploring options to incorporate the bill into a larger legislative package aligned with Trump’s agenda, while also considering passing it as standalone legislation. This flexibility reflects the bill’s cross-party popularity and the political importance of supporting working-class Americans.
Senate Minority Leader Schumer highlighted the contrast between this bill and other tax policies perceived to favour the wealthy, asserting that “working Americans… deserve tax relief, not the ultra-rich.” The No Tax on Tips Act thus emerges as a rare example of bipartisan agreement focused on delivering tangible benefits to everyday workers.
The bill also expands a business tax credit related to payroll taxes on tips in service industries such as barbering, hair care, nail care, and spa treatments, further broadening its scope of support.
