In a rare display of bipartisan unity, the U.S. Senate unanimously passed the “No Tax on Tips Act” on May 20, 2025, granting a tax deduction of up to $25,000 on cash tips for service workers, fulfilling a key campaign promise by President Donald Trump. Spearheaded by Senator Ted Cruz (R-Texas) and co-sponsored by Senators Jacky Rosen and Catherine Cortez Masto (D-Nev.), the bill, passed via unanimous consent, targets 4 million tipped workers in industries like restaurants, barbering, and spas. As the measure heads to the House, posts on X buzz with optimism from workers but caution from analysts warning of a $110 billion federal revenue loss over a decade, raising questions about economic fairness and fiscal responsibility.
The legislation allows employees earning under $160,000 annually—adjusted for inflation—to deduct cash tips reported to employers for payroll taxes, covering roles like waiters, hairdressers, and estheticians. Cruz hailed it as a lifeline for “blue-collar workers living paycheck-to-paycheck,” noting tips comprise 23% of restaurant workers’ income. Rosen emphasized its impact in Nevada, where hospitality workers rely on tips for rent and groceries. Posts on X echoed worker relief, with some calling it a “game-changer” for servers facing rising costs, though others questioned its limited scope, as 37% of tipped workers earn too little to owe federal income tax.
The bill’s swift passage, a rarity for substantive legislation, reflects its bipartisan appeal, sparked by Trump’s 2024 Nevada campaign pledge and later endorsed by Kamala Harris. It aligns with a broader Republican tax cut package, including border security and energy policies, but its standalone success surprised observers. The House, considering a similar “no tax on tips” provision in Trump’s “big, beautiful bill,” may vote soon, with Cruz predicting near-certain enactment. However, critics like James Hines Jr., a University of Michigan tax expert, argue it’s inefficient, as many tipped workers already pay minimal income tax. “Expanding the Earned Income Tax Credit would help more low-income families,” Hines said.
Skeptics also highlight fiscal risks. The Peter G. Peterson Foundation estimates a $110 billion revenue drop over 10 years, potentially widening the deficit. The Tax Foundation warns of tax disparities, as non-tipped workers like cooks miss out, and employers might avoid wage hikes to favor tip-based pay. Posts on X noted concerns about incentivizing underreporting, despite the bill’s requirement to report tips over $20 monthly. Conversely, supporters argue the average $1,260 tax cut for tipped workers in the bottom 60% income bracket, especially in high-tip states like Nevada and Wisconsin, justifies the cost.