No Tax on Tips Act passes Senate

WASHINGTON - Sen. Ted Cruz’s No Tax on Tips act, a key campaign pledge of President Donald Trump, received a surprising boost late Tuesday when a Democratic lawmaker helped push it through the Senate as a standalone bill, FOX Business reported.

No Tax on Tips

Sen. Jacky Rosen, D-Nev., spoke in support of the measure before filing a unanimous consent request - a motion allowing immediate passage unless a senator objects. 

With no objections raised, Senate presiding officer Cynthia Lummis, R-Wyo., announced the bill’s approval.

What’s in the ‘No Tax on Tips’ provision?

What we know:

The legislation, co-sponsored by Rosen, exempts cash tips and card-charged gratuities from federal income tax, allowing a 100% deduction on Tax Day.

"To those hotel workers and people who get tips, you are going to be very happy, because when I get to office we are going to not charge taxes on tips, people making tips," Trump said last year, according to the Associated Press. "We’re going to do that right away, first thing in office."

It would create a new tax deduction eliminating federal income taxes on tips for people working in jobs that have traditionally received them, as long as they make less than $160,000 in 2025. The Trump administration would publish a list of qualifying occupations within 90 days of the bill’s signing.

Only tips reported to the employer and noted on a worker’s W-2, their end-of-year tax summary, would qualify. Payroll taxes, which pay for Social Security and Medicare, would still be collected.

If adopted, the proposed deduction is set to expire after four years. Congressional budget analysts project the provision would increase the deficit by $40 billion through 2028. The Committee for a Responsible Federal Budget, an advocacy group, projects the cost would be $120 billion over a decade if the tip exemption is made permanent.

Read the legislation online.