Senate Republicans propose bill slashing taxes from tips

Senate Republicans recently crafted legislation off of former President Donald Trump’s proposal to eliminate federal taxes from tips off of wages.

The “No Tax on Tips Act” exempts “cash tips” — cash, credit and debit card charges, and checks — from federal income tax by allowing taxpayers to claim a 100% above-the-line deduction at filing for tipped wages. 

According to the IRS, cash tips include “those received directly from customers, electronically paid tips distributed to the employee by their employer and tips received from other employees under any tip-sharing arrangement. All cash tips must be reported to the employer.”

Currently, employee tips reported to the employer by the employee are included on the employee’s Form W-2, Wage and Tax Statement, for reporting on an individual tax return.

The legislation, proposed by Sens. Rick Scott of Florida, Ted Cruz of Texas, Steve Daines of Montana and Kevin Cramer of North Dakota, comes from an idea first touted by Mr. Trump at a Las Vegas rally earlier in the month.

The bill has the support of the National Restaurant Association, Professional Beauty Association and Texas Restaurant Association.

Mr. Daines called the proposal by Mr. Trump, the presumptive GOP presidential nominee, “a stroke of genius.”

“It shows the American people how in touch he is with the challenges of the working class in our great country,” Mr. Daines said. “This is an idea that came to President Trump from a waitress. She said, ‘Why are they taxing my tips?’”

“This legislation is a common-sense pro-worker bill that will help families deal with the historic inflation caused by the Biden administration,” Mr. Cruz said.

A recent poll from Fox News shows the proposal is popular, with 62% of registered voters supporting the idea and 32% disapproving of it.