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Texas Senator Ted Cruz has introduced new legislation that seeks to exempt tips from federal income tax. This comes weeks after Trump suggested that tips would be tax free if he returns to the White House.

Senator Cruz’s bill, named the No Tax on Tips Act, aims to relieve workers who rely on tips by ensuring that these earnings, including those received via credit and debit card charges, remain untaxed. He emphasized the importance of this measure for workers in various industries who depend on tips for their livelihood. “American workers in dozens of industries depend on tipped wages to support themselves,” Cruz stated.

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The bill would allow taxpayers to claim a 100-percent above-the-line deduction for tipped wages, effectively exempting these tips from federal income tax. However, this legislative proposal has its critics and financial implications. The Committee for a Responsible Federal Budget has estimated that exempting tips from federal income and payroll taxes could reduce federal revenues by $150 billion to $250 billion over the next decade, potentially adding billions to the annual deficits.

The proposal quickly garnered support from several GOP senators, such as Rick Scott from Florida and Kevin Cramer from North Dakota. Senator Scott said, “We need to take action now to lower costs for hardworking Americans and get our economy back on track.”

In addition, other notable Republicans have questioned the bill. Among them is Congressman Chip Roy of Texas. He specifically questioned why tipped workers should receive different tax treatment compared to other low- and medium-wage workers who do not receive tips.


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