Senate Unanimously Agrees to Another Tax Giveaway

Yesterday, the Senate passed by unanimous consent the No Tax on Tips Act, a bill that would create a federal income tax deduction of up to $25,000 a year for cash tips for eligible employees in jobs that “traditionally and customarily” receive tips as defined by the Treasury Secretary beginning in 2025. Eligibility is also limited to those making less than $160,000 in 2025, adjusted annually for inflation.

Both parties have supported an exemption for tipped income from federal taxes in recent months, with both President Trump and former Vice President Harris supporting the idea in their 2024 presidential campaigns. A similar measure is included in the House’s reconciliation bill, the “One Big Beautiful Bill Act,” currently under debate.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Exasperated doesn’t even begin to do it. This most recent vote to deliver “no tax on tips” is especially egregious, since it shows that the only thing the United States Senate appears to be able to agree on unanimously is that they want to deliver more tax cuts and totally disregard the potential impact on the national debt, which we estimate could be upwards of $100 billion or more over a decade.

Not only is this policy expensive, but it also benefits one specific group and is not how we should be going about designing tax policy. The whole point of tax reform is to reduce carveouts and expand the tax base, not narrow it further by giving specific industries handouts. This goes a total step in the opposite direction of simplicity.  

Given our high and rising levels of debt and the need for thoughtful solutions, we urge lawmakers to reserve their unanimous agreements for bills that will improve the situation, rather than making it worse.

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For more information, please contact Matt Klucher, Assistant Director for Media Relations, at klucher@crfb.org.