WASHINGTON (BLOOM) — On Wednesday, the U.S. Senate unanimously approved the “No Tax on Tips Act,” a bill aimed at removing federal income taxes on tips, gaining rare bipartisan backing. Although legislators touted it as a victory for service industry workers, some restaurant and hospitality advocates argue that it doesn’t tackle the financial challenges faced by most tipped employees, many of whom do not earn enough to owe federal income taxes.
This bill, proposed by Republicans with support from some Democrats, comes amidst congressional debates over larger budget plans that may include cuts to programs like Medicaid and food assistance—services that low-income workers significantly depend upon.
Following the vote, One Fair Wage, a nationwide advocacy organization dedicated to ending the subminimum wage for tipped workers, released a statement criticizing the bill as inadequate and potentially misleading.
“The Senate just passed a bill that offers moderate relief for some—but completely ignores the core crisis facing millions of workers in the service sector: poverty wages,” the group said in its statement. “Exempting tips from income taxes may sound helpful, but it won’t help two-thirds of tipped workers who earn so little they don’t even pay federal income taxes in the first place.”
The statement pointed to a newly released report titled Short Changed, produced by One Fair Wage and the UC Berkeley Food Labor Research Center. The report found that 66% of tipped workers make too little to benefit from the proposed tax exemption, arguing that what’s needed instead is a livable base wage with tips as supplemental income—not the primary source.
Saru Jayaraman, president of One Fair Wage and director of the UC Berkeley Food Labor Research Center, called the bill a “distraction from the real fight.”
“Trump wants credit for helping workers, but let’s not forget he tried to make tips the property of restaurant owners the last time he was in office,” Jayaraman said. “If Democrats want to offer a true alternative, they need to say it loud and clear: it’s time to raise the minimum wage and end the subminimum wage once and for all.”
The current federal minimum wage for tipped workers remains at $2.13 per hour, a rate that has not changed since 1991. Workers must make up the difference through tips or rely on employer supplementation if their total earnings fall short of the standard minimum wage.
Supporters of the bill, including Republican leadership, framed the legislation as a tax break aimed at easing financial strain on service workers. “This is about letting hardworking Americans keep more of what they earn,” one GOP senator said during a floor speech.
But critics argue that the bill comes at a time when other federal safety net programs are under threat, potentially leaving the same low-wage workers the bill is intended to help worse off.
“For restaurant workers already living paycheck to paycheck, losing health coverage and food benefits is not a policy tradeoff—it’s a crisis,” One Fair Wage said.
