U.S. Senate Unanimously Passes ‘No Tax on Tips Act’ in Historic Vote: What It Means for Workers and Businesses
The U.S. Senate has unanimously passed the ” No Tax on Tips Act ,” a key component of former President Donald Trump’s broader tax reform initiative. The vote, which took place on May 20, 2025, saw rare bipartisan agreement, with all 100 Senators supporting the bill. This landmark legislation aims to exempt tipped income from federal income taxes, a move that could significantly increase take-home pay for millions of service industry workers across the country.
The ” No Tax on Tips Act ” allows workers in traditionally tipped roles—such as restaurant servers, hotel staff, salon workers, and delivery drivers—to deduct 100% of their tips from federal income taxes. The bill covers tips received through cash, credit cards, and checks. Importantly, the measure is designed to last through 2028 and excludes individuals earning $160,000 or more annually, ensuring the benefits target lower- and middle-income workers.
Senator Ted Cruz (R-Texas) and Senator Jacky Rosen (D-Nev.) were among the bill’s most vocal supporters, highlighting the unusual but effective cross-party cooperation. For Democrats, supporting this popular initiative offers a way to connect with working-class voters without fully endorsing the broader GOP-led tax agenda. Meanwhile, Republicans have framed the bill as a “pro-worker” measure aimed at simplifying the tax code and rewarding hard-working Americans.
From a business perspective, the bill introduces significant changes. Employers in sectors like personal care and hospitality could benefit from expanded payroll tax credits, building on incentives already available in the food and beverage industry. However, the measure also introduces new compliance responsibilities. Employers must ensure accurate reporting of tipped income and navigate evolving guidelines from the Treasury Department, which is tasked with determining eligible occupations.
Supporters of the act argue that it will boost worker morale and increase disposable income, especially in sectors where tipping constitutes a large portion of total earnings. Critics, however, warn of unintended consequences. Labor experts caution that some employers might reduce base pay, shifting more reliance onto untaxed tips, which could create income instability for workers.
The legislation now heads to the House of Representatives, where it is expected to be included in the larger “One Big Beautiful Bill Act.” This sweeping bill not only extends Trump-era tax cuts but also introduces new deductions and programs, such as tax breaks for American-made car purchases and “MAGA savings accounts” for children born during Trump’s presidency. While the broader bill includes major spending increases for border security and defense, it also proposes cuts to Medicaid and the Affordable Care Act—moves that have sparked concern among public health advocates.
Economists are closely watching the fiscal implications of the overall package. Early estimates suggest that the combined measures could add up to $5 trillion to the national debt over the next decade. Moody’s recently downgraded the U.S. credit rating, citing these proposals as a major factor.
For now, though, the passage of the ” No Tax on Tips Act ” marks a rare moment of unity in Washington. It offers tangible financial relief to service workers and positions tax reform as a defining issue of the upcoming 2026 midterm elections. As the bill moves to the House, all eyes will be on how the broader tax package is shaped—and what it ultimately means for American workers and the economy.
RELATED
U.S. Senate Advances GENIUS Act to Regulate Stablecoins
Senate Approves Restoration of Aniocha North II State
