In a rare moment of total bipartisan agreement, the U.S. Senate unanimously passed Texas Senator Ted Cruz’s “No Tax on Tips Act” with a 100-0 vote. The legislation, originally a campaign promise by former President Donald Trump, marks a significant political and economic victory for Republicans ahead of the upcoming election season. The bill now moves to the GOP-controlled House of Representatives for final consideration before it can be signed into law by the president.
The bill proposes to exempt all earned tips from federal income taxes. This includes tips received in cash, by credit card, or those distributed through tip pools or shared systems. The measure is intended to ease the financial burden on millions of Americans who rely on tips to make a living, particularly those working in industries like hospitality, food service, and personal care. Cruz emphasized that the bill is a targeted form of tax relief for blue-collar workers living paycheck to paycheck, and noted that both parties recognize the need to support this portion of the workforce.
The “No Tax on Tips Act” is part of a broader Republican-led initiative to reform the U.S. tax code with a focus on working-class Americans. Cruz, a long-time proponent of tax reform, said the bill was designed with “guardrails” to prevent abuse and ensure that the benefits are directed specifically at legitimate tipped workers. Cruz has previously been involved in major economic policies, including the 2017 tax cuts and trade negotiations under the USMCA. His continued leadership on economic issues appears to be gaining traction, particularly with this win.
While the Senate version mirrors the House bill that passed earlier in the year, it includes some notable differences. The Senate version places a cap of $25,000 per year on the amount of tip income that can be deducted from federal taxation. Additionally, it introduces income phase-outs, reducing the benefit for individuals earning more than $150,000 and for couples earning above $300,000 annually. These provisions were included to maintain the bill’s focus on middle- and lower-income workers, and to prevent high earners from disproportionately benefiting from the policy.
To clarify who qualifies for the exemption, the legislation instructs the U.S. Treasury Secretary to issue an official list of occupations where tipping is customary. This list is expected within 90 days of the bill’s passage. Only individuals in these job categories—those who were regularly earning tip income as of the end of 2024—will be eligible for the deduction. This measure aims to ensure accountability and prevent misuse of the tax break by those in non-tipped professions.
The proposal has drawn widespread support, including praise from prominent Democrats such as Senate Majority Leader Chuck Schumer and Senator Jackie Rosen, signaling that the measure has strong bipartisan momentum. The unanimous Senate vote, along with the earlier House approval, suggests the bill is likely to pass quickly through the final legislative steps. If enacted, the “No Tax on Tips Act” would mark a major shift in tax policy for millions of service workers, offering tangible financial relief and potentially becoming a centerpiece of Republican economic messaging heading into 2026.
