Senate Unexpectedly Passes No Tax on Tips Act in a Unanimous Vote

In a surprising and rare display of bipartisan unity, the U.S. Senate passed the No Tax on Tips Act with a unanimous 100-0 vote on May 20, 2025. This landmark legislation, introduced by Senator Ted Cruz of Texas, aims to provide significant tax relief for tipped workers across the United States, including waiters, bartenders, and other service industry professionals who rely heavily on gratuities to make ends meet. The bill, known as S.129, has sparked widespread discussion due to its potential to reshape the financial landscape for millions of workers in industries like hospitality, food service, and transportation. As it moves to the House of Representatives for further consideration, the act has already ignited hope among workers and raised questions about its broader economic impact.

A Win for Tipped Workers

The No Tax on Tips Act seeks to eliminate federal income taxes on cash tips for workers in roles that traditionally and customarily receive gratuities. The Senate’s version of the bill includes a provision allowing a tax deduction of up to $25,000 on tipped income, offering immediate financial relief to service workers. For many in the restaurant, bar, and rideshare industries, tips represent a substantial portion of their earnings. By removing the tax burden on these earnings, the bill aims to put more money directly into the pockets of hardworking Americans.

The legislation has been championed as a victory for working-class families, particularly in states like Nevada, where the service sector drives much of the economy. Nevada’s Democratic Senators Catherine Cortez Masto and Jacky Rosen played a key role in pushing the bill forward, working alongside Republicans to secure its passage. The Culinary Workers Union, representing about 60,000 casino and hotel workers in Nevada, praised the senators for their efforts, urging the House to act swiftly to finalize the legislation. “This is sensible legislation that supports workers who rely on tips to survive,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association.

The unanimous Senate vote was unexpected, especially given the polarized political climate in Washington. Senator Jacky Rosen, a co-sponsor of the bill, requested unanimous consent to pass the measure, and with no objections from senators present, it sailed through the chamber. This rare moment of agreement underscores the broad appeal of the policy, which was a key campaign promise made by President Donald Trump during a 2024 campaign stop in Las Vegas. The idea also gained support from Vice President Kamala Harris and the Culinary Workers Union, highlighting its bipartisan roots.

How the No Tax on Tips Act Works

The No Tax on Tips Act is designed to be straightforward. It creates a new federal income tax deduction for cash tips, capped at $25,000 annually, for workers in qualifying roles. The Treasury Department will define which occupations meet the criteria of “traditionally and customarily” receiving tips, ensuring the benefit targets those who need it most, such as waiters, bartenders, hairdressers, and rideshare drivers. Unlike the House version of the bill, which includes no deduction cap and is part of a larger tax package, the Senate’s standalone bill focuses solely on tipped income.

For workers, this could mean significant savings. For example, a waiter earning $30,000 in tips annually could deduct up to $25,000 from their taxable income, potentially saving thousands of dollars in federal taxes each year. The policy is particularly impactful for low- and middle-income workers who often face tight budgets. By reducing their tax liability, the bill aims to provide financial breathing room and reward the hard work of service industry employees.

The Broader Context: A Part of Trump’s Tax Agenda

The No Tax on Tips Act is closely tied to President Trump’s broader tax reform agenda, which includes extending the 2017 Tax Cuts and Jobs Act and introducing new tax breaks. The House of Representatives passed a comprehensive tax package, dubbed the “One Big Beautiful Bill Act,” on May 22, 2025, by a narrow 215-214 vote. This package also includes a provision to eliminate taxes on tips, though it differs from the Senate’s bill by having no deduction cap and being bundled with other measures, such as tax breaks on overtime pay and extensions of the 2017 tax cuts.

The House bill has sparked controversy due to its estimated $3.8 trillion to $6.5 trillion cost over the next decade, with critics arguing it disproportionately benefits high earners and corporations while cutting funding for programs like Medicaid and SNAP. Senate Republicans, led by Majority Leader John Thune, have signaled they will make significant changes to the House package, which could affect how the no-tax-on-tips provision is implemented. The Senate’s standalone bill, however, has been praised for its simplicity and focus on tipped workers.

Economic Implications and Criticisms

While the No Tax on Tips Act has garnered widespread support, it’s not without its critics. The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimates that the Senate’s bill could cost $100 billion or more over a decade, adding to the national debt. CRFB President Maya MacGuineas called the unanimous vote “exasperating,” arguing that it prioritizes tax cuts over fiscal responsibility. Some analysts, like Alex Muresianu of the Tax Foundation, warn that the policy could encourage more industries to adopt tip-based compensation models, potentially reducing overall tax revenue and complicating the tax code.

On the other hand, supporters argue that the economic benefits outweigh the costs. By increasing take-home pay for tipped workers, the bill could boost consumer spending in local economies, particularly in service-heavy regions. The National Restaurant Association and other industry groups have endorsed the measure, calling it a lifeline for workers and a way to help businesses attract and retain staff in a competitive labor market.

What’s Next for the Bill?

The Senate’s unanimous passage of the No Tax on Tips Act is just one step in the legislative process. The bill now heads to the House, where it will need to be reconciled with the broader tax package passed on May 22. The differences between the two bills—particularly the Senate’s $25,000 deduction cap versus the House’s uncapped exemption—will likely require negotiation. House Speaker Mike Johnson has emphasized the importance of delivering on Trump’s campaign promises, but the narrow 215-214 vote in the House suggests challenges ahead, especially with opposition from some Republicans and all Democrats.

If the House passes the Senate’s bill or a reconciled version, it will head to President Trump’s desk for signing. Given his vocal support for the policy, approval seems likely. However, the timeline remains uncertain, with Senate negotiations on the broader tax package expected to extend into July 2025. Workers and industry advocates are watching closely, hopeful that the bill will become law before the end of the year.

Why It Matters

For millions of tipped workers, the No Tax on Tips Act represents more than just a tax break—it’s a recognition of their hard work and a chance to keep more of their earnings. In a time when rising costs have squeezed household budgets, this legislation could provide meaningful relief. The unanimous Senate vote also signals a rare moment of bipartisan cooperation, showing that lawmakers can come together on issues that directly impact working-class Americans.

As the bill moves forward, its fate will depend on the House’s willingness to prioritize tipped workers and navigate the complexities of the broader tax package. For now, service industry workers across the country are celebrating a potential victory, while policymakers and analysts debate the long-term implications of this bold move.

For more details on the No Tax on Tips Act, check out CNET’s coverage or PBS News.

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