House Republicans' bill includes 'no tax on tips' proposal. How would it work?

[BumRushDaShow]

Source: USA Today

May 17, 2025, 5:05 a.m. ET


House Republicans recently unveiled a sweeping tax plan that included a key promise from President Donald Trump’s campaign trail: no tax on tips.

Polling suggests it’s a popular idea across party lines, and Trump has credited the idea for aiding his 2024 election win. But critics argue that no taxes on tips is a costly, unfair tax break that will benefit few lower-income Americans.

“A relatively small number of workers are going to see any significant tax savings from this proposal,” said Joseph Rosenberg, a senior fellow at the left-leaning Urban-Brookings Tax Policy Center. Here's what we know so far about the latest proposal.

Who qualifies for no tax on tips?

The bill would create a temporary tax deduction through 2028 for employees and independent contractors in occupations that “traditionally and customarily received tips,” likely servers, for example. Should the bill pass, those occupations would be hashed out by the Treasury secretary. Highly compensated workers who make at least $160,000 in 2025 would be ineligible.

Read more: https://www.usatoday.com/story/money/2025/05/17/no-tax-on-tips-gop-bill/83649380007/

[Silent Type]

1. Not sure it would be wise for Democrats to oppose this or removal of taxes on Social Security. It definitely

will help people on the lower end of the scale. Even if it's only a few million that get any benefit, I sure wouldn't stand in the way.

[LymphocyteLover]

15. they aren't going to oppose these provisions but the overall bill must be opposed for all its

horrible cuts elsewhere especially to Medicaid. Any Dem would be foolish to support this bill just for this part of it.

[Lovie777]

2. It won't work, like vouchers won't work for schools ...............

it means that the servers would have to report monetary given to them directly by customers, which include tips given to them by debit/credit cards. In many cases, all tips could be combined, and some business would get their share and spit the rest with the servers.

Either the way, they may get less.

[markodochartaigh]

3. I'll tell you how it is meant to work.

We all know that the supremacist court has ruled that politicians cannot take bribes, but they can take tips.

So, hypothetically, let's say that a politician, we'll call him "Stump" receives something of value, let's say an airplane, from someone, for our hypothetical example let's say a Middle Eastern country.
In order to qualify as a bribe the supremacist court has ruled that there must be an explicit tit for tat beforehand. So let's assume that "Stump" had no meetings with the foreign government which were recorded under The Presidential Records Act.
So then, we can assume that Stumpy's new plane will qualify as a tip. Under Snyder v. US state and local officials can accept tips, surely the supremacist court wouldn't think twice about extending this benefit to the greatest president ever, especially since presidents can't be convicted of anything anyway. (For clarification our hypothetical "Stump" is a Republican president and so qualifies for this immunity).
Well, now it is intuitively obvious to the most casual observer that President Stump's plane is a tip, and thus tax free.

[CaptainTruth]

4. So as a small business service provider, could I work for free...

...& receive payment only in tips?

[mackdaddy]

5. Of course all states with state income tax would have to address this, too.

Either it is still owed to the state, or the state would have to write in a similar exception/deduction.

And wasn't there a recent case where it was decided giving a politician money up front for something was a bribe, but giving them something after the favor was only a 'tip' and perfectly legal?

[delisen]

7. That Supreme Court case you mentioned is troubling

II remember correctly:
The political office holder demanded a payment to him personally because a decision he had made in favor of a business ended up greatly benefiting the business. The business was reluctant to pay him but eventually did so. The politician was tried and convicted but when the case got to the Supreme Court. the right wing justices decided it was just a tip and not a corrupt practice.

It was a fairly recent case and I think Kavanaugh wrote the opinion. It was a troubling decision.

[Buddyzbuddy]

6. Would end of the year bonuses be considered a tip?

What about live online sellers that receive tips from viewers or dancers?

[no_hypocrisy]

8. Servers, etc. would be cheated out of future Social Security without taxing

their tips. (If SS survives past the House vote.)

[republianmushroom]

9. Bribes are consider tip as per SCOUS, no tax. Got it.

[Marthe48]

10. I worked in food service before tips were taxed

I was working in food service when the gov. put a tax on tips. At the time, withholding was going to be based on all waitressess getting 15% tips from all diners. I was always a cook, and didn't get tips. The waitresses I worked with rarely got 15% from any diner, let alone all of them. They usually got no tip, or a dollar or two. I was in the meeting when the manager explained what was going to happen. She didn't like to impose withholding on an imaginary income and the waitresses didn't like the news. Knowing that at the time, waitresses were paid half of the minimum wage with the expectation that the rest of their wage would come from tips, I thought it was unfair to the people I worked with.
I suppose that if tips aren't taxed every penny the rwnj grab will be counted as tips. Because they do everything so well. >sarcasm

[NGeorgian]

12. Okay, If I was still working I'd pay my assisstant minimum wage and ...................................................

tip her $3,000 a month!

[TexasBushwhacker]

13. Ultimately, I don't think they're doing tipped workers any favors

Less taxed income means lower Social Security benefits at retirement or disability.

[twodogsbarking]

14. Let's make taxes even worse. We are so good at it.