In an unexpected turn, the U.S. Senate passed the No Tax on Tips Act on Tuesday using unanimous consent, a rarely used procedural move for substantive legislation.
The bill, introduced by Sen. Ted Cruz (R-TX) and co-sponsored by a bipartisan group including Nevada Democrats Jacky Rosen and Catherine Cortez Masto, proposes a tax deduction of up to $25,000 on reported cash tips for workers earning $160,000 or less annually.
The passage followed Sen. Rosen’s floor request for unanimous approval, which moved forward without objection from any of the other 99 senators, an uncommon outcome for tax legislation.
The bill now advances to the House, where Republican leaders have incorporated a version of the proposal into a fiscal package aligned with President Donald Trump’s campaign platform.
“Whether it passes free-standing or as part of the bigger bill, one way or another, No Tax on Tips is going to become law and give real relief to hard-working Americans,” Cruz said during remarks on the Senate floor. He described the rare bipartisan consensus as nearly guaranteeing the policy’s eventual enactment.
The legislation applies to traditionally tipped workers, with eligible sectors to be defined by the Treasury Department. Employees would be allowed to deduct the full amount of their cash tips, including those received via debit and credit cards, up to the $25,000 cap. The threshold for income eligibility is set at $160,000 for 2025 and will adjust annually with inflation.
Rosen, whose state has the highest share of tipped workers in the country, called the bill a meaningful step for the hospitality and service industries. “Nevada has more tipped workers per capita than any other state. So this bill would mean immediate financial relief for countless hard-working families,” she said.
She also stated her willingness to support viable policy regardless of its political origin, noting that “No Tax on Tips was one of President Trump’s key promises to the American people, which he unveiled in my state of Nevada. And I am not afraid to embrace a good idea, wherever it comes from.”
The proposal follows campaign trail commitments made last year by both Trump and then-Vice President Kamala Harris. While the National Restaurant Association has voiced support, several tax experts and labor advocates have criticized the bill.
Detractors argue that most low-income tipped workers already pay minimal or no federal income tax and that the policy could inadvertently encourage wage reclassification by employers to capitalize on the tax break.
Labor advocates see the bill as potentially reinforcing the existing two-tier wage system, where employers can pay tipped workers below the minimum wage so long as tips make up the difference. In March, Michigan lawmakers declined to eliminate this “subminimum” wage structure in a deal that underscored the continued contentiousness of the issue.
The Senate version of the No Tax on Tips Act diverges from the House proposal in two key areas. It imposes a cap on deductible tip income and makes the deduction a permanent fixture in the tax code.
The House bill, in contrast, includes no cap and would expire at the end of 2028. Preliminary estimates place the cost of the House version at $40 billion over four years, while the Congressional Budget Office has yet to evaluate Cruz’s Senate bill.
House Republicans have folded their version of the tip tax proposal into a sweeping party-line budget bill that includes cuts to Medicaid and food assistance. Though supportive of the tip provision, Senate Democrats have said they oppose passing it as part of a larger package with such cuts.
“We shouldn’t be forcing working families to choose between keeping their health care and keeping their tips — which is why we want this bipartisan bill to pass on its own, not [as] part of a harmful, extreme budget bill,” Rosen said.
Senate Minority Leader Chuck Schumer also praised the measure, underscoring its significance for everyday workers. “Working Americans — from servers, to bartenders, delivery drivers, and everything in between — work hard for every dollar they earn and are the ones who deserve tax relief, not the ultra-rich,” he said in a statement.
Original article: https://www.yogonet.com/international/news/2025/05/21/105518-senate-passes-no-tax-on-tips-bill-with-unanimous-consent-sending-measure-to-house
