What To Know About Trump’s ‘No Tax On Tips’ Pledge In The GOP Budget Bill
President Donald Trump’s 2024 campaign slogan, “No tax on tips,” is moving closer to becoming law.
The concept is now part of a sweeping tax cut package passed by House Republicans and, in a surprise move, unanimously approved by the Senate.
The proposal has gained bipartisan support from lawmakers, the public, and business groups, especially those in the service industry. However, critics argue it could cost the government billions while offering limited benefits to low-income workers.
What’s In The Proposal?
The “No Tax on Tips” provision would eliminate federal income tax on tips for workers in traditionally tipped occupations, provided they earn less than $160,000 in 2025. The Trump administration would be responsible for defining which jobs qualify within 90 days of the bill’s enactment.
Only tips officially reported to employers and included on W-2 tax forms would be exempt. Payroll taxes (for Social Security and Medicare) and state and local taxes would still apply. The deduction would expire after four years. Government estimates place the cost at $40 billion through 2028, with long-term projections hitting $120 billion if made permanent.
Trump’s Campaign Promise
Trump introduced the idea in Las Vegas—where many workers depend on tips—during a pitch to working-class voters coping with rising living costs. The phrase quickly gained popularity, with supporters writing it on restaurant receipts and discussing it with their service providers.
The proposal is part of a broader tax plan that also includes eliminating taxes on overtime pay, Social Security benefits, and auto loan interest. It has even received limited support from the influential Culinary Union and Nevada’s Democratic senators, as well as former Vice President Kamala Harris.
How Would It Affect Workers?
Experts say the benefits would be uneven. About one-third of tipped workers already earn too little to owe federal income taxes, so they wouldn’t see any change.
“This doesn’t help the lowest earners—it benefits higher-earning tipped workers the most,” said Michael Lynn, a Cornell professor who studies tipping behavior. He also pointed out that non-tipped low-wage workers—who also struggle financially—would see no benefit.
The average tax cut for eligible tipped workers would be around $1,800, according to the Urban-Brookings Tax Policy Center.
Industry and Labor Reactions
The National Restaurant Association supports the proposal, saying it would return money to workers and help restaurants hire and retain staff.
In Nevada, the Culinary Workers Union praised Democratic senators for working across the aisle to advance the bill and urged the House to finish the job. The union represents about 60,000 hospitality workers, including bartenders and servers.
However, not all labor advocates are on board. One Fair Wage, a group representing service workers and restaurant employers, criticized the measure as a distraction from efforts to raise the minimum wage and eliminate sub-minimum wages for tipped workers.
“This gives moderate relief to some, but benefits the wealthy most,” said Saru Jayaraman, the group’s president.
Source: AP News
