Key Facts
Sen. Jacky Rosen, D-Nev., presented the bill to the floor on a "unanimous consent" request and unexpectedly faced no objection, meaning the measure automatically passed.
The bill, which proposes a tax deduction of up to $25,000 for cash tips reported to employers, heads to the House, which is also considering a “no tax on tips” measure as part of its Trump agenda megabill that could be voted on later this week.
Sen. Ted Cruz, R-Texas, who introduced the bill, commented on the successful vote Tuesday, saying “the certainty that we will see no tax on tips become the law of the land, I think, is very close to 100%.”
Cruz noted the bill could pass with Trump’s tax bill or be voted in as a standalone law.
The bill does not apply to employees making more than $160,000, a figure that will be adjusted annually to account for inflation.
Big Number
$1,260. That is the average tax cut tipped workers in the bottom 60% of the income distribution would receive under the bill, according to the Peter G. Peterson Foundation. Employees are required to report tips exceeding $20.
Which Restaurant Workers Would Benefit The Most From The No Tax On Tips Act?
Workers in Alaska, Wyoming, South Dakota, Kansas, Wisconsin and West Virginia would benefit the most from the bill’s passage, as those six states’ restaurant staffers have some of the highest share of tip income in the country, according to CNBC, which cited data from financial services firm Square.
Key Background
Trump campaigned last year on the concept of having no taxes on tips last year, introducing the proposal during a stop in Nevada and also pushing for no taxes on overtime, which is included in his tax bill. The position was later adopted by the campaign of then-Vice President Kamala Harris and became one of the few newly proposed federal policies to garner wide bipartisan support. Backers of removing taxes from tips have pointed to the significant portion tips make up of restaurant and some hospitality workers’ income. Tips consist of a rough average of 23% of restaurant workers’ total income, according to Square. However, the Tax Foundation has found the No Tax on Tips Act could create tax disparities between tipped and non-tipped working class employees and incentivize employers to not provide basic wage increases.
This article was originally published on Forbes.
