Senate Passes Trump’s “No Tax On Tips” Plan – Kamala Endorsed It, Voters Didn’t Buy It – Financial Freedom Countdown
In an unexpected 100-0 vote, the Senate passed the “No Tax on Tips Act,” a move that caught even seasoned Capitol Hill watchers off guard.
Originally framed as a conservative, pro-worker policy idea, the bill now appears to have broad bipartisan appeal; but not necessarily due to ideological consensus. Instead, it seems politics, not policy, drove the outcome.
What the Bill Actually Does
The legislation would end federal income taxes on tips earned by service workers.
Unlike wages, which remain fully taxable, tips would be exempt.
The measure could substantially boost take-home pay for millions of Americans in industries like food service, hospitality, and beauty.
Trump Floated It First And Made It a Campaign Centerpiece
Donald Trump first proposed the idea during a rally in Las Vegas in early 2024. The former president declared that, under his second term, tips would be “tax-free from day one,” presenting it as a way to reward hard-working Americans.
The message resonated strongly with working-class voters in Nevada, Arizona, and beyond.
Kamala Harris Echoes Trump’s Promise After Seeing Its Popularity
In a striking political pivot, Vice President Kamala Harris endorsed the idea of eliminating taxes on tips shortly after Trump’s announcement gained traction.
Harris echoed the same policy during a campaign appearance, claiming it would offer “real relief to hardworking Americans.”
Critics quickly noted that her statement came after Trump’s message had already gone viral, raising accusations of political opportunism and reactive policymaking.
Her timing suggests Democrats may have recognized the idea’s popularity and rushed to get on board.
Trump Accused Harris of Copying Him
“Kamala Harris, whose ‘Honeymoon’ period is ENDING, and is starting to get hammered in the Polls, just copied my NO TAXES ON TIPS Policy,” Trump posted on his Truth Social social media platform. The difference is, she won’t do it, she just wants it for Political Purposes! This was a TRUMP idea – She has no ideas, she can only steal from me. Remember, Kamala has proposed the LARGEST TAX INCREASE IN HISTORY – It won’t happen. MAKE AMERICA GREAT AGAIN!!!”
Democrats Quietly Helped It Pass
Sen. Ted Cruz (R-Texas) introduced the No Taxes on Tips Act earlier this year.
Despite some grumbling about the policy’s fiscal implications, Democratic senators voted in lockstep with their GOP colleagues.
Sen. Jacky Rosen (D-Nev.) brought the bill to the floor with the expectation that it would be blocked, but Sen. Ted Cruz (R-Texas) declined to. It passed via unanimous consent.
“‘No taxes on tips’ was one of President Trump’s key promises to the American people,” Rosen said on the Senate floor. “And I am not afraid to embrace a good idea wherever it comes from. “
“I’m proud of what the Senate just did, and I commend Democrats and Republicans even in a time of partisan division, coming together on a common-sense policy,” said Cruz. “I think that’s great for workers in all 50 states.”
Behind closed doors, many Democrats reportedly viewed the vote as a “no-win” scenario politically and opted not to oppose a popular, easy-to-message idea; even if they had doubts about its long-term costs.
A Shift from IRS Enforcement to Tax Exemptions
Traditionally, the IRS has attempted to crack down on underreported tip income through targeted audits and reporting requirements.
This bill flips that script, formally removing tips from federal taxation. The move could ease compliance burdens on small businesses and workers alike; but may also encourage underreporting of wages as tips.
A $25,000 Deduction But Only for Reported Tips and Middle-Income Workers
The bill creates a new tax deduction of up to $25,000 specifically for cash tips; so long as those tips are reported to employers for payroll tax withholding.
The deduction is limited to workers earning $160,000 or less in 2025, with that income cap set to adjust annually for inflation.
How Much Will This Cost?
While no formal Congressional Budget Office (CBO) score has been released yet, analysts estimate the bill could cost the federal government billions in lost revenue over the next decade.
Some policy experts worry this could deepen the deficit at a time when fiscal hawks are already raising alarm bells.
What’s Next in the House?
The House is expected to take up the bill in the coming weeks. It is likely to pass in the GOP-controlled chamber via the stand-alone measure or Trump’s “big, beautiful bill” that will extend tax cuts
Few potential amendments could be introduced; particularly around income thresholds or anti-fraud provisions.
A few Democratic House members have signaled they may seek adjustments to ensure the bill doesn’t disproportionately benefit higher earners in tipping professions.
Mixed Reaction from Economists
While popular among voters, the bill has sparked debate among economists.
Some argue it distorts the tax code by privileging one form of income, while others see it as a much-needed lifeline for low-wage workers in high-inflation times.
The broader question remains: is this good policy or good politics?
Political Winds Are Blowing Toward the Service Sector
With both Trump and Harris embracing the proposal, it’s clear that tipping culture has entered the political mainstream.
Whether this bill marks a genuine shift in tax policy or just another campaign talking point remains to be seen. Either way, the political calculus is unmistakable: service workers are now seen as a critical voting bloc.
Could This Open the Floodgates for More Income Exemptions?
Policy watchers warn that this kind of exemption could set a precedent for other forms of income to be carved out of the federal tax base. If tips are exempt, what’s next – gig earnings? Bonuses? Commission-based income?
The bill may open a policy Pandora’s box.
Despite unanimous support, the bill’s origins and political implications carry some baggage.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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