US Senate Surprisingly Passes Bipartisan ‘No Tax on Tips’ Bill

In a rare moment of bipartisan unity, the US Senate has passed a bill exempting tips earned by service industry employees from federal income tax. The measure was initially proposed by Sen. Ted Cruz (R-TX) and later championed by Sen. Jacky Rosen (D-NV). Using a procedural maneuver known as unanimous consent, the Senate resoundingly approved the proposal without a single objection.

The Bill Envisions a More Measured Approach

This newest legislative move is unexpected, given that bills concerning the federal tax code generally attract significant scrutiny and debates. Rosen brought the bill to the floor, arguing that working-class Americans needed immediate relief. She noted that the fact that this idea originated from President Trump was no reason to dismiss it, insisting that the new measure went beyond partisan agendas.

We shouldn’t be forcing working families to choose between keeping their health care and keeping their tips.

Sen. Jacky Rosen

The legislation allows workers in eligible tipped occupations to deduct up to $25,000 in tips as part of their annual taxable wages. Cash and card tips will qualify under the deduction, but only for individuals earning under $160,000 annually. According to the bill, determining which industries qualify under the rule will be up to the Treasury Department.

The Senate version differs from a related proposal in the House Republican budget package. That iteration would offer an unlimited tip deduction but sunset the provision in 2028. While the Senate option is more conservative, introducing strict caps on deductible tips, the provision makes the changes permanent, meaning that tipped employees can enjoy greater financial security.

Opponents Argue the Legislation Does Not Address the Real Issue

Cruz discussed the bill after the vote, lauding it as a rare feat in Congress. With the bill now through the Senate, its future depends on whether the House advances the standalone version or keeps it as part of their broader and more contentious budget package. If the House opts to fast-track the Senate’s standalone, permanent version, it could become one of this year’s rare bipartisan wins.

Whether it passes freestanding or as part of the bigger bill, one way or another, no tax on tips is going to become law and give real relief to hard-working Americans.

Sen. Ted Cruz

While this provision enjoys unprecedented support in the Senate, it faces criticism among labor economists and advocacy groups. They argue the measure does not adequately address systemic issues like the sub-minimum base wage. Brookings Institution analysts note that more than a third of tipped workers owe no federal income tax due to their low earnings.

Despite criticisms, proponents hope the bill will make a difference for workers in sectors like hospitality, restaurant work, and tourism. Such a boost could be especially relevant in states like Nevada, where the tipped workforce comprises more than 5% of all jobs due to the high concentration of casino resorts, which primarily rely on such positions.