No tax on tips
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No tax on tips is an American proposal to not tax income earned from tips. During the 2024 US presidential election campaign, both main candidates supported legislation to remove tax from tips.
In May 20 2025, The United States Senate passed the bipartisan No Tax on Tips Act proposed bill by unanimous consent.[1] A version of the bill was included in the One Big Beautiful Bill Act and signed into law on July 4, 2025.[2]
Support
[edit]At the federal level several bills have been proposed to reduce or eliminate taxes on tips.[3] The proposal is also being considered in at least 20 states.[4]
The proposal was supported by both Donald Trump and Kamala Harris in the 2024 United States presidential election.[5]
The National Restaurant Association has expressed support.[6]
Criticism
[edit]The proposal gives priority to tipped workers and leaves out the vast majority of Americans who are not in tipped occupations.[7][8]
Some tipped workers have incomes so low that they do not owe federal income tax.[8][9] If customer perceived workers take home a greater share of their tips, they could tip less.[10]
The focus on taxes on tips could also distract from raising the tipped and untipped minimum wages and reduce pressure on employers to raise wages.[4][10][11]
The proposal could lead more industries to rely more on tipping which is widely unpopular.[12][13]
The proposal could also enable tax avoidance as income is represented as tips such as bonuses or commissions earned by hedge fund managers.[4][14][15]
If the proposal only covered federal income tax it would not affect many low-wage workers that pay more in payroll tax than in income tax. In contrast, if the proposal included payroll taxes, workers could lose access to Social Security and Medicare benefits.[9] Tips could also be excluded from wages, resulting in workers receiving reduced unemployment benefits.[4] Reduced taxes would also lead to a loss of tax revenue.[4][12][14]
See also
[edit]References
[edit]- ^ "Senate unexpectedly passes the No Tax on Tips Act in a unanimous vote". NBC News.
- ^ "What's in the tax and spending bill that Trump has signed into law". AP News. July 3, 2025. Retrieved July 6, 2025.
- ^ Schulz, Bailey (February 26, 2025). "Does the House GOP budget resolution end taxes on tips? What we know so far". USA TODAY.
- ^ a b c d e Cooper, David; Mast, Nina (February 6, 2025). ""No tax on tips" will harm more workers than it helps: Proposals in Congress and now 20 states could encourage harmful employer practices and lead to tip requests in virtually every consumer transaction". Economic Policy Institute.
- ^ Alvarez, Christopher (August 27, 2024). "Both presidential candidates are calling for taxes on tips to be eliminated". NPR.
- ^ "National Restaurant Association Statement on the Introduction of the No Tax on Tips Act of 2025". National Restaurant Association. January 16, 2025.
- ^ Duke, Brendan (July 17, 2024). "Sen. Ted Cruz's No Tax on Tips Act Does Little for Low- and Moderate-Wage Workers But Opens Door to Tax Abuse by Wealthy". Center for American Progress.
the No Tax on Tips Act is deeply flawed; it would leave out the more than 95 percent of low- and moderate-wage workers who are not in tipped occupations
- ^ a b Tedeschi, Ernie (June 24, 2024). "The "No Tax on Tips Act": Background on Tipped Workers | The Budget Lab at Yale". Budget Lab at Yale University.
- ^ a b Gleckman, Howard (June 17, 2024). "Untipped: Why Trump's Tax Cut Promise Would Hurt Many Service Workers". Tax Policy Center.
- ^ a b Grabenstein, Hannah (September 4, 2024). "Killing taxes on tips sounds good, but experts say it doesn't solve the real problem". PBS News.
- ^ Sainato, Michael (August 27, 2024). "Is 'No tax on tips' a distraction from the fight to end sub-minimum wages?". The Guardian. ISSN 0261-3077.
- ^ a b Muresianu, Alex (July 23, 2024). "Frustrated with Tipping? No Tax on Tips Could Make It Worse". Tax Foundation.
- ^ Lee, Hank (March 11, 2025). "Tipping point: Americans fed up with 'out of control' tips culture". WCNC-TV.
- ^ a b Garrett, Luke (August 12, 2024). "No tax on tips: Why politicians love it, and economists don't". NPR.
- ^ Berlin, Ian; Gale, William G. (September 17, 2024). "No tax on tips: An answer in search of a question". Brookings Institution.
