Congress Considers No Tax on Tips Bill Amid Industry Split

A proposal to eliminate federal income tax on tipped wages is gaining traction in Congress as part of President Trump's domestic policy agenda, promising to allow tipped workers to deduct up to $25,000 in tips from their taxable income. Supporters, including the National Restaurant Association and many restaurant workers, argue the measure puts more money in workers’ pockets and helps those relying on tips, which often form a significant part of their income. However, critics, including the Independent Restaurant Coalition and some restaurant owners, warn that the bill disproportionately benefits high earners, excludes service charges that could aid back-of-house staff, complicates enforcement, and may cost the federal government billions in lost revenue. The legislation has sparked division among restaurant workers and owners, with concerns that it fails to address equitable tip distribution and could incentivize employers to reclassify workers to avoid minimum wage requirements. Economists forecast the tax cut on tips could increase the federal deficit by $100 billion over the next decade, and the measure is set to expire at the end of 2028 if passed. The debate highlights the ongoing tension between providing tax relief to tipped workers and ensuring fair labor practices within the hospitality industry.