Sen. Ted Cruz (R-Texas) has introduced legislation to exempt tips, including tips in the form of credit and debit card charges, from taxation, following up on an idea that former President Trump promoted during a recent trip to meet Republicans on Capitol Hill.
“American workers in dozens of industries depend on tipped wages to support themselves,” Cruz said in a statement.
He said his bill, the No Tax on Tips Act, would ensure that tipped workers such as restaurant servers “get to keep all of those tips.”
The proposal immediately drew the support of other GOP senators, including Sens. Rick Scott (R-Fla.), Steve Daines (R-Mont.) and Kevin Cramer (R-N.D.
“We need to take action now to lower costs for hardworking Americans and get our economy back on track,” said Scott in a statement.
The proposal would exempt tips provided in the forms of cash, credit and debit card charges and checks from federal income tax by allowing taxpayers to claim a 100-percent above-the-line deduction for tipped wages.
The price of the plan could add billions to the annual deficits. The Committee for a Responsible Federal Budget estimated Sunday that exempting tip income from federal income and payroll taxes could lead to a decrease of $150 billion to $250 billion in federal revenues over a decade.
Several House Republicans have offered a companion measure in the lower chamber, the Tax Free Tips Act.
It is backed by Reps. Thomas Massie (R-Ky.), Matt Gaetz (R-Fla.) and Marjorie Taylor Greene (R-Ga.).
But some conservatives are not embracing the idea.
Rep. Chip Roy (R-Texas), a prominent House conservatives, wrote on the social media platform X that the sponsors of the bill need to explain why Congress should treat tipped workers differently than low- and medium-wage workers who don’t receive tips.
