In a rare show of total bipartisan support, the U.S. Senate has unanimously passed the No Tax on Tips Act, providing long-awaited relief to millions of American service workers who rely on gratuities to make ends meet.
The legislation eliminates federal income taxes on the first $25,000 in tips earned and officially reported by workers in the service industry. This tax exemption applies to individuals earning up to $160,000 annually and is expected to benefit waitstaff, bartenders, delivery drivers, salon workers, and others who depend heavily on tips.
Employers in personal service industries—such as barbershops, nail salons, and spas—will also now qualify for expanded payroll tax credits on tips, similar to those already available in the restaurant sector.
The bill passed the Senate on May 20 via unanimous consent, following efforts led by Sen. Jacky Rosen (D-NV) to build cross-party consensus. It marks a significant moment of legislative unity on an issue that directly affects the working class.
President Trump, who made eliminating taxes on tips a signature campaign promise in 2024, praised the Senate’s action as a “win for the working people.” Vice President Kamala Harris also voiced her support, showing that the measure has backing from both sides of the aisle.
However, not everyone is cheering. Some economists have warned that while the bill may provide immediate relief, it could inadvertently widen income inequality or incentivize employers to keep base wages low. Others argue that tip-based workers deserve more comprehensive reform, such as a higher minimum wage or targeted tax credits.
Fiscal watchdogs estimate the legislation could cost the federal government between $10 billion and $15 billion per year, with long-term budget impacts potentially exceeding $100 billion over the next decade.
Roughly 4 million Americans work in tipped positions, with about a third of them under the age of 25. For many, this bill means a noticeable boost in take-home pay—and a signal that Washington is finally paying attention to those serving on the front lines of the economy.
The legislation now heads to the House of Representatives, where Republican leadership is expected to include it in the broader “One Big, Beautiful Bill” package. That larger reconciliation effort also includes tax relief, border security funding, and entitlement reform—though some moderate Republicans remain hesitant about other provisions in the bundle.
If passed by the House, the No Tax on Tips Act would be one of the most significant worker-friendly tax changes in recent history—delivering tangible results for millions of Americans who often go overlooked in Washington’s agenda.
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