Opposition to ‘No Tax on Tips’ Budget Proposal

Some segments of the U.S. restaurant industry don’t support President Donald Trump’s proposal to eliminate federal taxes on tips, saying it would help too few people and obscure bigger issues in the way tipped workers are paid. The Independent Restaurant Coalition, which represents nearly 100,000 restaurant and bars, has appealed to Congress to reconsider the proposal, which is part of the president’s spending bill. Even some workers who rely on tips say they oppose making them tax-deductible.

Concerns About the Proposal

“I think there’s a huge hole in this concept of ‘no tax on tips’ because a lot of restaurant workers aren’t receiving tips in the first place,” said Elyanna Calle, a bartender in Austin, Texas, and president of the Restaurant Workers United union. “It’s not helping most kitchen workers, and oftentimes those are the people who are being paid the least.”

Tips Included in Sprawling Tax Cuts Package

For now, making tips tax-free appears to have broad support among lawmakers. Both Trump and his Democratic rival in last year’s U.S. presidential election, former Vice President Kamala Harris, campaigned on the concept. The House included it in a tax cuts package approved last month. The bill would eliminate federal income taxes on tips for people working in jobs that have traditionally received them as long as they make less than $160,000 in 2025.

Main Industry Trade Group Supports Tax-Free Tips

Wary of wading into politics, many restaurant chains contacted by The Associated Press about tax-free tips didn’t respond or referred questions to the National Restaurant Association, including Waffle House, The Cheesecake Factory, First Watch and the parent companies of Olive Garden, Applebee’s and Chili’s. The National Restaurant Association, a trade organization that represents nearly 500,000 U.S. restaurants and bars, applauded the House’s passage of Trump’s spending bill and said it wants to see tax-free tips. The association estimates the measure would benefit more than 2 million servers and bartenders.

A Push to Eliminate Taxes on Service Charges

The Independent Restaurant Coalition wants Congress to eliminate taxes on service charges, which are being used to compensate employees at an increasing number of restaurants. Around 15% of U.S. restaurants add some form of service charge to customers’ bills, according to the National Restaurant Association. George Skandalos, a pizza restaurant owner in Moscow, Idaho, was tired of seeing servers count out hundreds of dollars of tips at the end of the night while people in the kitchen scrubbed the floor on their hands and knees. So he started experimenting with different compensation models.

Tipped Workers Seek Higher Wages

But Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union Local 226 in Las Vegas, said restaurants should just pay their kitchen workers more to compensate for servers earning tips. “’No tax on tips’ is an opportunity for Republicans and Democrats to deliver something to working class folks,” he said. Pappageorge wants Congress to take up a separate bill introduced by Nevada Democrat Steven Horsford that would eliminate taxes on tips but also require restaurants to pay workers at least the federal minimum wage of $7.25 per hour.

Conclusion

The proposal to eliminate federal taxes on tips has sparked a debate within the restaurant industry, with some segments opposing the idea and others supporting it. While the National Restaurant Association estimates that the measure would benefit more than 2 million servers and bartenders, others argue that it would help too few people and obscure bigger issues in the way tipped workers are paid. The Independent Restaurant Coalition and some workers who rely on tips oppose making them tax-deductible, citing concerns that it would not address the underlying problem of low base pay.

FAQs

• What is the proposal to eliminate federal taxes on tips?
  The proposal is part of President Donald Trump’s spending bill and aims to eliminate federal income taxes on tips for people working in jobs that have traditionally received them as long as they make less than $160,000 in 2025.
• Who supports the proposal?
  The National Restaurant Association, a trade organization that represents nearly 500,000 U.S. restaurants and bars, supports the proposal.
• Who opposes the proposal?
  The Independent Restaurant Coalition, which represents nearly 100,000 restaurant and bars, opposes the proposal, as well as some workers who rely on tips.
• What are the concerns about the proposal?
  Concerns include that it would help too few people, obscure bigger issues in the way tipped workers are paid, and not address the underlying problem of low base pay.
• What is the alternative proposed by the Independent Restaurant Coalition?
  The coalition wants Congress to eliminate taxes on service charges, which are being used to compensate employees at an increasing number of restaurants.

  By DEE-ANN DURBIN, Associated Press

  Originally Published: June 19, 2025 at 12:55 PM EDT