Sen. Ted Cruz reintroduces bill to eliminate income taxes on tips

A tip jar at a cafe in the Brooklyn borough of New York, US, on Friday, Aug, 23, 2024. Vice President Kamala Harris this month said she would seek to end taxes on tipped income for service industry workers, matching a proposal that her 2024 rival Rep

Sen. Ted Cruz (R-Texas) on Thursday reintroduced a bill that would eliminate income tax on tip income.

The bill would allow a worker to claim a 100% deduction on "cash tips" that would include tips through cash, credit card charges and checks.

What we know:

Cruz was joined by Sens. Steve Daines (R-Mont.), Pete Ricketts (R-Neb.), Kevin Cramer (R-N.D.), Catherine Cortz Masto (D-Nev.) and Jacky Rosen (D-Nev.) in reintroducing the bill.

A companion bill was filed in the House of Representatives.

What Does the Bill Say?

The bill would allow those working in industries that traditionally receive tips to deduct those tips on income tax filings. The bill would require the Secretary of the Treasury to publish a list of traditionally tipped jobs that would qualify for the deduction.

The deduction would be capped at $25,000. 

Workers making more than $150,000 would not qualify for the exemption.

What they're saying:

"American workers in many industries rely on tipped wages to make ends meet," Cruz said. "Today, I’m introducing my bipartisan No Tax on Tips Act—legislation I authored to fulfill President Trump’s promise to end the wrongful practice of taxing voluntary tips. I’ve long believed the GOP should be the party of bartenders, of waiters and waitresses, and this bill is an important step to ensure we are addressing the economic needs of working Americans. This pro-worker bill will deliver relief to families facing rising costs caused by the Biden administration’s inflationary policies."

Rosen said it was just one piece of legislation of a broader reform she hoped for to help Nevada's service and hospitality workers.

"I’ll also keep fighting to raise the minimum wage and eliminate the subminimum wage for service employees, lower costs, and cut taxes for all hardworking Nevadans," Rosen said.

The backstory:

Cruz first introduced legislation to eliminate taxes on tips last June following a Donald Trump rally where he floated the idea of eliminating taxes on tips.

The original bill did not have bipartisan support and was not voted on.

Critics worry that the reduced taxes could lead to a higher deficit.

Workers in tipped industries like food and beverage and beauty services make up around 40% of the U.S. workforce.

The Source: Information in this article comes from Sen. Ted Cruz.

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