Sen. Ted Cruz (R-Texas) has introduced legislation that would exempt tips, including those made on credit and debit cards, from the tax, following an idea promoted by former President Trump during a recent trip to meet with Republicans on Capitol Hill.
“American workers across many industries rely on tipped wages to survive,” Cruz said in a statement.
He said the bill, known as the Tip Tax Ban Act, would allow tipped workers, such as restaurant servers, “to keep all of the tips they receive.”
The proposal quickly garnered support from other Republican senators, including Sens. Rick Scott (R-Fla.), Steve Daines (R-Mont.) and Kevin Cramer (R-House of Representatives).
“We must act now to ease the burden on hardworking Americans and get our economy back on track,” Governor Scott said in a statement.
The proposal would exempt tips paid in the form of cash, credit card or debit card charges or checks from federal income tax by allowing taxpayers to claim a 100 percent deduction for tipped wages.
The cost of the plan could add billions of dollars to the annual deficit. The Committee for a Responsible Federal Budget estimated Sunday that exempting tip income from federal income and payroll taxes could reduce federal revenues by $150 billion to $250 billion over 10 years.
Several Republican members of the House of Representatives have proposed a related bill in the House of Representatives, the “Tax-Free Tip Act.”
The bill is sponsored by Reps. Thomas Massie (R-Ky.), Matt Gaetz (R-Fla.) and Marjorie Taylor Greene (R-Ga.).
But some conservatives don’t accept the idea.
Rep. Chip Roy (R-Texas), a leading conservative member of the House of Representatives, wrote on social media platform X that the bill’s sponsors needed to explain why Congress should treat tipped workers differently from low- and moderate-wage workers who don’t receive tips.
