The No Tax on Tips Act is headed to the House for a vote after bipartisan support.
And with backing as well from President Donald Trump, the act looks likely to become law. Despite criticism from labor advocates, the policy has gained wide support across the aisle.
The legislation passed the U.S. Senate with rare unanimous support Tuesday.
The bill was introduced in January by U.S. Sen. Ted Cruz, R-Texas, and co-sponsors such as U.S. Sen. Jacky Rosen, D-Nevada.
“Nevadans sent me here to fight for them – and I’m going to keep working to lower costs, raise wages and make sure the people who power our economy, our working families, can keep more of what they earn,” Rosen told senators Tuesday. “We’re going to cut taxes for real, hard-working Americans, for Nevadans, for everyone – not just for billionaires.”
Rosen called for the Senate to pass the bill for a unanimous consent vote, meaning that if any senator disagreed, it would be shot down. But in the Republican-led Senate, the No Tax on Tips Act passed. The unanimous consent move is highly unusual for tax laws.
The bill has been positioned as a win for low wage restaurant earners, especially in “tip credit” states like Nevada, where employers can pay employees below the minimum wage if the difference is made up in their tips.
“Nevada’s service and hospitality workers are the backbone of our economy, and they deserve financial relief at a time when they are getting squeezed by rising costs,” said Rosen in a January press release. “This bipartisan bill will ensure tipped workers in Nevada can keep more of their hard-earned money.”
The tax deduction would apply to anybody with up to $25,000 per year in tips who earns less than $160,000, which will change with inflation. While the U.S. would take in about $11 billion less per year with the tax cuts, workers are unlikely to see most of these gains.
Over one-third of tipped workers do not earn enough to pay federal taxes, tips or otherwise. Known for its tourism industry, Nevada has the highest rate of tipped workers in the country at 25.8 waiters and waitresses per 1,000 jobs.
The tax cut has been widely criticized by policy experts who worry employers would be incentivized to put more employees on tip-heavy wages, resulting in less taxes for the government and less secure wages for employees.
“Why would someone whose compensation is a mix of tips and wages be better off after taxes than somebody who just gets wages?” asked Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center, to CNBC. “The striking thing about this proposal is it fails every score that you might make for tax policy.”
The No Tax on Tips movement first gained national momentum in the Silver State at a June 2024 Trump rally, where the president promised “to those hotel workers and people who get tips, you are going to be very happy.”
The promise gained momentum on both sides of the aisle, with one 2024 survey by Ipsos finding that three-fourths of Americans supported the policy. So too did the National Restaurant Association, which usually lobbies against minimum wage increases.
The bill’s House vote date is still unknown, but the measure is expected to receive widespread support as it did in the Senate.
