In a rare move, the Senate unanimously passed a bill that would make tips exempt from taxation. The proposal, the No Tax on Tips Act, which still must be passed by the House of Representatives before it becomes law, has been pushed by the Trump administration and is supported by members of Congress on both sides of the aisle.
Bipartisan bill passes Senate without objection
On Tuesday, the Senate passed a bill to make many types of tips paid to workers exempt from taxation. The legislation will “amend the Internal Revenue Code of 1986 to eliminate the application of the income tax on qualified tips through a deduction allowed to all individual taxpayers, and for other purposes.” Specifically, workers would be able to claim a tax deduction of up to $25,000 on cash tips that they report to their employers. The deduction would be available to workers who earn less than $160,000 per year, though that amount would go up with inflation in subsequent years.
NBC News reported that the bill was initially proposed in January by Sen. Ted Cruz, R-Tex., and has co-sponsors of both parties, including Nevada Democratic Sens. Jacky Rosen and Catherine Cortez Masto. On Tuesday, Rosen brought the bill up for “unanimous consent,” a procedure by which a bill passes if no one objects, but can be blocked from immediate passage by any senator. The unanimous consent process is usually used for more routine procedural matters, but is often blocked for substantive issues like tax policy. This time, however, no one objected, thus passing the bill. It now moves to the House, where it could be passed as a stand-alone bill or included in a broader budget bill that is being debated.
Bipartisan cooperation amid a larger divide over taxes and spending
The rare moment of bipartisan unity over the tips bill comes amid a larger and bitter partisan fight over the overall federal budget. The Trump administration has pushed its “big, beautiful bill” that would extend tax cuts from the first Trump administration and boost military and border security spending. To pay for it all, the legislation would enact massive cuts in programs like Medicaid; even so, the bill is still projected to add trillions of dollars to the national debt. President Donald Trump had pledged to exempt tips and overtime pay from taxes as part of that bill, which recently cleared a critical House committee.
Prominent senators on both sides of the aisle celebrated the tips bill while referencing the larger politics at play. Cruz offered praise for Trump for making “a promise to the American people that he would eliminate taxes on tips” and proclaimed that the bill “will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers, the very people who are living paycheck-to-paycheck.” Meanwhile, Senate Minority Leader Chuck Schumer, D-N.Y., praised the passage of the bill but framed the politics surrounding it differently, stating that “while President Trump and Republicans push tax breaks for billionaires and stick the middle class with the bill, Senate Democrats are standing strong to protect America’s working families.”
The approval by the Senate of the tips tax exemption pushes that policy change one step closer to becoming law, which politicians of both parties agree will help ordinary people across the country. The bipartisan cooperation behind the passage of this bill, however, is unlikely to last long as the two parties remain deeply divided about other tax and spending issues.
