In a rare moment of sweeping bipartisan unity, the United States Senate recently passed a significant piece of tax legislation that could change the financial landscape for millions of American workers. While the headlines focused on numbers and votes, the broader implications of this moment stretch far beyond legislative chambers. For tipped workers across the country—from waiters to bartenders, from delivery drivers to casino workers—this bill could represent more than a tax break. It could mean real, lasting financial relief.
The “No Tax On Tips Act,” spearheaded by Texas Senator Ted Cruz and championed early on by President Donald Trump, passed the Senate with a unanimous 100-0 vote. The bill now heads to the Republican-controlled House of Representatives, where it is widely expected to pass.
The measure, introduced to fulfill a prominent campaign promise by Trump, proposes that tips—whether received in cash, via check, or through electronic payment—should be excluded from federal income taxation. Supporters argue the bill could deliver meaningful benefits to millions of Americans who rely on gratuities to make ends meet.
A Campaign Promise Realized
“President Trump made a promise to the American people that he would eliminate taxes on tips,” Senator Cruz stated shortly after the Senate vote. “In Congress, I formed a bipartisan, bicameral coalition to get that done, and in the Senate, introduced the No Tax on Tips Act.”
Flanked by Nevada Democrat Jackie Rosen, Cruz took to the Senate floor ahead of the final vote, where the two senators emphasized the human impact of the legislation over politics. “This legislation will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers—the very people who are living paycheck-to-paycheck,” Cruz said.
The proposal’s overwhelming support in the Senate stunned some observers, who have become accustomed to legislative gridlock in Washington. But the politics of this bill were different. At a time when inflation, housing costs, and economic uncertainty have placed pressure on lower-income and middle-class families, lawmakers across the aisle appeared ready to act.
What the Bill Actually Does
At its core, the “No Tax on Tips Act” redefines how the IRS treats tipped income. Under the proposed law, any tips earned—whether in cash, added to a credit or debit card, or distributed through tip-sharing agreements—would be 100% deductible from federal income tax starting in 2025.
This means workers would no longer need to report these earnings as taxable income on their federal returns. However, the Senate bill includes specific “guardrails” to ensure that only those in traditional tip-earning roles are eligible. For instance, eligibility is limited to jobs where tipping is customary and regular as of December 31, 2024.
The Treasury Secretary would be tasked with creating and publishing a definitive list of those qualifying occupations within 90 days of the bill’s passage. These might include positions in hospitality, food service, cosmetology, transportation, and entertainment—industries where tipping forms a critical part of employee compensation.
Cruz emphasized that the legislation is not only about reducing taxes but also about recognizing the essential role tipped workers play in the American economy. “These are workers who don’t have high salaries, who often work nights, weekends, and holidays, and who depend on the generosity of others to support their families,” he said.
Scope and Limits: Senate vs. House Versions
Although the Senate and House versions of the bill share common goals, there are differences in how each version defines and applies the tax deduction.
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Annual Deduction Cap: The Senate version sets an annual cap of $25,000 on the amount of tip income that can be deducted. The House version currently has no cap.
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Income Phase-Out: The Senate version introduces a phase-out of the deduction. Individuals earning over $150,000—or $300,000 for joint filers—would see the value of the deduction gradually reduced by $100 for every $1,000 of income above that threshold. The House version, by contrast, ends the deduction abruptly at $160,000 in income.
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Timeframe: Both versions would allow the deduction for tax years 2025 through 2028, though amendments could later expand or shorten this window.
As the bill heads to the House, legislators will be tasked with reconciling these differences before the final version can be signed into law.
A Win for Working Americans
Industry leaders, small business owners, and workers themselves have voiced support for the bill, describing it as a long-overdue acknowledgment of how tip-based income functions in the real world.
“Tips are not bonuses—they are how many of us survive,” said Rachel Lopez, a server in Phoenix. “We count on every dollar we make, and it’s frustrating to lose a chunk of that to taxes, especially when the wages we earn per hour are so low.”
Some employers in the service sector have also applauded the bill. By reducing the tax burden on workers, they argue, it could increase morale, reduce turnover, and improve the financial security of a largely underrepresented segment of the workforce.
According to the U.S. Bureau of Labor Statistics, more than 4.3 million Americans work in occupations where tipping is customary. For many of these workers, the base wage is far below the standard federal minimum wage, with tips making up the bulk of their earnings.
Cruz and his colleagues insist the bill could be transformative. “It’s not just about numbers on a tax return,” Cruz said. “It’s about giving dignity and relief to the people who serve our meals, cut our hair, drive our Ubers, and care for our families in ways large and small.”
Bipartisan Support Signals Broader Momentum
One of the most surprising elements of the “No Tax on Tips Act” is its broad bipartisan support. Senate Majority Leader Chuck Schumer, a Democrat from New York, and Senator Jackie Rosen of Nevada both publicly praised the bill.
“This is a win for working people,” Rosen said. “It shows that even in a divided government, we can find common ground when we focus on policies that make a real difference in people’s lives.”
While Cruz and Trump were central figures in pushing the measure forward, its passage in the Senate underscores a rare consensus in today’s polarized political climate.
What’s Next?
The House of Representatives is expected to take up the bill within weeks. While Republicans hold the majority, the bill’s unanimous Senate passage is expected to place pressure on House Democrats to join in support.
President Trump, who has made tax relief for working-class Americans a focal point of his second-term agenda, is expected to sign the bill immediately once it reaches his desk.
In the meantime, advocacy groups and labor organizations are ramping up outreach efforts to educate tipped workers about the bill’s potential impact. Tax professionals are also watching closely, as the legislation could significantly alter filing practices for millions beginning in 2025.
Final Thoughts: A Populist Victory?
The “No Tax on Tips Act” represents a rare legislative moment—one where policy, politics, and public sentiment align. While it will take time to evaluate the law’s full economic impact, it’s already being heralded as a populist victory in an era where many Americans feel left behind by Washington.
For Ted Cruz, the bill marks another notch in his record of championing conservative economic policy. And for President Trump, it fulfills a campaign promise that resonated with workers who often go unnoticed but rarely go unappreciated.
If passed by the House and signed into law, the measure could shift how America views and values tipped labor—not just as a job, but as a backbone of the service economy that deserves recognition, relief, and respect.
