In a rare show of bipartisan unity, the U.S. Senate on May 20 passed a bill that would allow workers to deduct up to $25,000 in cash tips from their taxable income. The legislation, introduced by Sen. Ted Cruz (R-Texas) and unexpectedly brought to a voice vote by Sen. Jacky Rosen (D-Nevada), was approved unanimously — a notable event for substantive federal legislation.
The proposed deduction would apply only to cash tips and be available to individuals earning up to $160,000, a threshold that would increase with inflation. The idea echoes a key campaign promise from former President Donald Trump.
“I am not afraid to embrace a good idea, wherever it comes from,” said Rosen in her floor remarks. “So I agreed we need to get this done.” 
However, the bill is not law yet. It still requires approval from the House of Representatives, where Republicans are currently working to advance a broader tax and spending package that includes a similar tip-related tax break for the next four years.
Critics note the deduction’s limited reach. Only 2.5% of U.S. workers are in tipped roles, according to the Budget Lab at Yale, and 37% of those workers don’t earn enough to owe federal income taxes, meaning they wouldn’t benefit from the new deduction.
According to estimates from the Peter G. Peterson Foundation, ending taxes on tips could cost the federal government $110 billion in revenue over the next decade.
