The U.S. Senate has unanimously passed the No Tax on Tips Act, a major legislative win for service-industry workers. The bill, introduced by Senator Ted Cruz (R-Texas), would allow eligible workers to deduct up to $25,000 of their reported tips from federal income tax each year.
Senator Cruz released a statement celebrating the bipartisan success and underlining the impact for millions of Americans. “This legislation will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers, the very people who are living paycheck-to-paycheck,” he said.
The bill defines “qualified tips” as cash tips (including credit, debit, or check-based gratuities) received by employees in occupations that “traditionally and customarily” receive tips before December 31, 2023. To claim the deduction, the worker must report the tips to their employer for withholding and must have compensation under a set threshold (currently around $160,000 for eligibility) in the prior tax year.
One key benefit is that this measure reduces the tax burden on tipped workers — servers, bartenders, delivery drivers, nail techs, and others whose pay relies heavily on gratuities. Cruz emphasized that for many of these workers, every dollar matters and allowing them to keep more of what they earn strengthens fairness and morale.
However, analysts and labor policy experts caution that while the bill offers meaningful relief to some, it may not benefit all tipped workers equally. Some worry it could incentivize employers to rely more on tips rather than raising base wages, or could complicate eligibility for other benefits like the Earned Income Tax Credit.
With the Senate’s unanimous 100-0 vote achieved by unanimous consent, the bill now moves to the House of Representatives for consideration. If passed there and signed into law, it would mark a landmark shift in how tipped income is taxed in the United States.
In summary, Ted Cruz’s No Tax on Tips Act aims to ensure that service workers keep more of what they earn in tips — shifting tax policy to recognize the reality of service compensation and signal respect for workers whose incomes depend on gratuities.
