The US Senate passed the No Tax on Tips Act on Tuesday after the Nevada senator Jacky Rosen brought the bill up for a unanimous consent request.
“This bipartisan bill is a good idea. It has support from Democrats and Republicans, so we should pass it, well, as soon as possible, without any poison pills,” said Rosen, a Democrat, on the Senate floor.
The bill was introduced in the Senate in January 2025 by Senator Ted Cruz and a bipartisan group of co-sponsors which included Rosen and the Nevada senator Catherine Cortez Masto.
No objections were made by Rosen’s request, resulting in the passage of the bill, which now goes to the House.
The bipartisan bill will create a tax deduction of up to $25,000 for cash tips reported to employers by workers for withholding purposes on payroll taxes, with a cap on the salary for eligible workers at $160,000 annually.
The bill calls for the US Department of Treasury to issue a list of occupations that traditionally receive tips within 90 days of the bill’s enactment.
Ending taxes on tips gained traction during the 2024 presidential election, with Donald Trump touting the plan on the campaign trail in Nevada, and Kamala Harris later endorsing the idea.
Economists and labor advocates have criticized the legislation, with concerns it will incentivize the expansion of tipped work, undermine pay increases and would affect only a small segment of about 5% of low-paid workers who receive tips.
According to Brookings Institute researchers, 37% of all tipped workers already pay no federal income tax because their earnings are so little, and eliminating sub-minimum wages for tipped workers would be more impactful.
“Without having these earnings floors in place, the minimum wage floor and calling for an increase, workers are vulnerable to exploitation and inequality in the labor market which is harmful overall for the economy,” Lena Simet, a senior researcher Human Rights Watch, told the Guardian in August 2024 on the push to end taxes on tips.
“It doesn’t mean that workers can no longer be tipped. It just means a tip comes on top of a wage floor that would guarantee them a minimum.”
