In a rare show of bipartisan unity, the U.S. Senate has unanimously passed the No Tax on Tips Act, a groundbreaking bill that would exempt tip income from federal taxes, delivering much-needed financial relief to millions of American workers in the service industry.
Spearheaded by Senator Ted Cruz of Texas and co-sponsored by Senator Jacky Rosen of Nevada, this legislation aims to support employees in hospitality, food service, delivery, and other tip-dependent roles where gratuities often make up the bulk of their income.
“This is about fairness,” Senator Cruz emphasized. “These hardworking individuals clock long hours and live paycheck to paycheck. They deserve to keep more of what they earn.”
Senator Rosen highlighted the bill’s significance for states like Nevada, where tourism drives the economy. “Service workers are truly the backbone of our economy,” she said. “This bill finally gives them the respect and support they deserve.”
What the Bill Means for Workers
The No Tax on Tips Act proposes changing the federal tax code so that tip income is exempt from federal income tax. Currently, tipped workers must report tips as taxable income, and employers must withhold taxes accordingly. If this bill becomes law:
- Tips would still need to be reported for transparency.
- Tips would no longer be subject to federal income tax.
- The exemption applies only to tips—not to wages or employer-paid bonuses.
Supporters argue this change will simplify tax reporting, reduce administrative burdens for small businesses, and increase take-home pay for millions of workers who rely on tips.
Support and Next Steps
Worker advocacy groups and service employees have praised the bill, pointing out that it could save them hundreds, if not thousands, of dollars each year.
Some tax experts have voiced concerns about how this could affect Social Security contributions and enforcement, but lawmakers maintain these challenges are manageable.
With Senate approval secured, the bill now heads to the House of Representatives, where debates are expected to begin in the coming weeks.