US Senate Approves New Federal Tax Exemption for Workers Who Rely on Tips
WASHINGTON — Workers who rely on tips moved a step closer Tuesday to seeing a significant tax break when the U.S. Senate approved a new federal tax exemption.
U.S. Sen. Ted Cruz, R-Texas, authored the bill, which was approved by unanimous consent, meaning no senator objected to its passage.
Cruz cast the show of bipartisan solidarity as a miracle and said the policy is now almost certain to pass the House and become law.
The exemption on tips will have a lasting effect on millions of Americans, Cruz said.
What the Bill Means for Workers
The bill would let workers deduct up to $25,000 in cash tips from their federal income taxes. Workers — and their employers — would still be responsible for payroll taxes for Social Security and Medicare.
“We ought to be fighting for waiters and waitresses,” Cruz said on the Senate floor moments after the bill passed. “We ought to be fighting for bartenders, taxi cab drivers, Uber drivers. We ought to be fighting for beauticians and nail salon workers. We ought to be fighting for all the men and women who are working and working hard.”
A Brief History of the Bill
President Donald Trump proposed the “No Tax on Tips” policy on the campaign trail last year while in Nevada, a swing state with a high per-capita number of tipped workers.
Many Republicans and Democrats rushed to embrace the idea.
Cruz introduced legislation to implement the policy, with both of Nevada’s Democratic senators quickly signing onto the bill.
Concerns About Fairness
Some experts and lawmakers have questioned the proposal’s fairness because it would place much different tax burdens on, for example, a waiter and a house painter with identical income.
It has proved broadly popular, however, and a version is included in the One Big Beautiful Bill Act that Republicans are moving through the House.
Democratic Opposition to the Larger Bill
Democrats vehemently oppose many of the provisions in that sweeping multitrillion-dollar legislation, however, from new Medicaid work requirements to tax breaks that benefit wealthy Americans.
Sen. Jacky Rosen, D-Nev., brought Cruz’s bill up Tuesday and moved for its passage.
She said the proposal should not be included in a package that contains so many provisions Democrats oppose.
“We shouldn’t be forcing working families to choose between keeping their health care or keeping their tips, which is why we want this bipartisan bill to pass on its own,” Rosen said.
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Conclusion
In conclusion, the US Senate has approved a new federal tax exemption for workers who rely on tips. The bill, which was authored by U.S. Sen. Ted Cruz, R-Texas, would let workers deduct up to $25,000 in cash tips from their federal income taxes. While some experts and lawmakers have questioned the proposal’s fairness, it has proved broadly popular and is expected to pass the House and become law.
Frequently Asked Questions
Q: What is the new federal tax exemption for workers who rely on tips?
A: The new federal tax exemption would let workers deduct up to $25,000 in cash tips from their federal income taxes.
Q: Who authored the bill?
A: The bill was authored by U.S. Sen. Ted Cruz, R-Texas.
Q: What is the “No Tax on Tips” policy?
A: The “No Tax on Tips” policy is a proposal that was introduced by President Donald Trump on the campaign trail last year. It would exempt tips from federal income taxes.
Q: Why do some experts and lawmakers question the proposal’s fairness?
A: Some experts and lawmakers question the proposal’s fairness because it would place much different tax burdens on workers with identical income, such as a waiter and a house painter.
Q: What is the One Big Beautiful Bill Act?
A: The One Big Beautiful Bill Act is a sweeping multitrillion-dollar legislation that includes a version of the “No Tax on Tips” policy. However, Democrats vehemently oppose many of the provisions in the bill.
