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No Tax on Tips: A Flashy Idea That Benefits Few
Lawmakers passed two measures to eliminate federal taxes on tips this week, a move proponents say will especially benefit the restaurant workers who make nearly half their overall salary from tips.
But even those who support the idea called it a cynical half measure that allows lawmakers to score points without alienating corporate interests through more meaningful policies. They also warned that the massive cuts to Medicaid in the Republicans’ spending bill will dwarf any benefit workers see from the tax exemption. The budget reconciliation bill, which passed the House early Thursday morning, would kick 10.3 million people off Medicaid and leave 7.6 million without insurance, the Congressional Budget Office said. An analysis by One Fair Wage estimated that tipped and other restaurant workers will account for 1.2 million of those individuals within the next decade.
“Look, it is criminal what this big horrible bill is doing,” said Ted Pappageorge, secretary-treasurer of Culinary Workers Union Local 226 in Nevada, home to the highest concentration of tipped workers. The union supports removing federal taxes on tips, he said, but warned that Republicans’ massive cuts will overwhelm the benefit.
“Trillions of dollars of tax cuts for the super-rich while millions of folks lose health care—no taxes on tips is not gonna fix that,” Pappageorge said.
Senators unanimously passed the bipartisan No Tax on Tips Act on Tuesday. The legislation, introduced by Sen. Ted Cruz (R-TX) in January, now goes to the House for consideration. If approved, it would amend the Internal Revenue Code to allow workers to claim a 100 percent tax deduction for tips totaling up to $25,000 each year.
But even those who support the idea called it a cynical half measure that allows lawmakers to score points without alienating corporate interests through more meaningful policies. They also warned that the massive cuts to Medicaid in the Republicans’ spending bill will dwarf any benefit workers see from the tax exemption. The budget reconciliation bill, which passed the House early Thursday morning, would kick 10.3 million people off Medicaid and leave 7.6 million without insurance, the Congressional Budget Office said. An analysis by One Fair Wage estimated that tipped and other restaurant workers will account for 1.2 million of those individuals within the next decade.
“Look, it is criminal what this big horrible bill is doing,” said Ted Pappageorge, secretary-treasurer of Culinary Workers Union Local 226 in Nevada, home to the highest concentration of tipped workers. The union supports removing federal taxes on tips, he said, but warned that Republicans’ massive cuts will overwhelm the benefit.
“Trillions of dollars of tax cuts for the super-rich while millions of folks lose health care—no taxes on tips is not gonna fix that,” Pappageorge said.
Senators unanimously passed the bipartisan No Tax on Tips Act on Tuesday. The legislation, introduced by Sen. Ted Cruz (R-TX) in January, now goes to the House for consideration. If approved, it would amend the Internal Revenue Code to allow workers to claim a 100 percent tax deduction for tips totaling up to $25,000 each year.
https://prospect.org/labor/2025-05-23-no-tax-on-tips-flashy-idea-benefits-few/
Restaurant workers are more than twice as likely to have incomes under the poverty line.