Restaurant workers claim that eliminating taxes on tips is negatively impacted by reductions in benefits.

United States President Donald Trump’s ambitious tax and spending bill has elicited criticism from various quarters, including Democrats and some fiscally conservative members of his own party. However, one notable provision has garnered bipartisan backing: the proposal to eliminate taxes on tips for service industry workers.

The Senate recently advanced a bill that corresponds with the House version, delivering on a campaign promise from Trump while also reflecting an idea championed by former Vice President Kamala Harris. Under the House plan, employees will be allowed to deduct reported tips from their taxable income entirely. The Senate, however, proposes a phased deduction system, allowing up to ,500 for individuals or ,000 for joint filers, gradually eliminating the breaks for higher earners. This tax incentive is set to expire at the end of 2028.

Should this bill receive final approval, filers could start deducting some or all of their tips as early as 2026, potentially increasing their disposable income. Nevertheless, analysts predict that eliminating the tax on tips could add approximately 0 billion to the federal deficit over the next decade.

For many restaurant employees, the existing federal tipped minimum wage stands at a modest .13 per hour, with slight increases in cities like New York, where it is .55. This wage structure is designed under the assumption that tips would supplement their earnings to reach the federal minimum wage of .25 per hour. Recent surveys highlighted by the White House show that a significant 83 percent of restaurant workers support a no-tax-on-tips policy. The National Restaurant Association has also endorsed Trump’s initiative, emphasizing its benefits for the workforce.

Michelle Korsmo, president and CEO of the National Restaurant Association, remarked that the inclusion of provisions for tax-free tips recognizes the vital contributions of the skilled workforce in the service industry. Approximately two million tipped employees would see positive financial impacts from these changes, while the overtime provisions would reward the more than 13 million hourly employees across the sector.

While proponents argue that the bill would provide essential financial relief to workers, some advocacy groups express concern about potential drawbacks. Critics argue it could lead to cuts in vital programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP), which many restaurant workers rely on. Jessica Ordenana, a server at a Chili’s restaurant in Queens, voiced concerns about how these changes may affect workers already living on the financial edge.

One Fair Wage, an advocacy group, noted that a staggering 66 percent of tipped workers in the U.S. do not earn enough to owe federal income tax, making the elimination of taxes on tips unlikely to benefit this demographic drastically. For instance, a worker earning the tipped minimum wage would take home just over ,400 annually, which raises concerns about financial stability and reliance on social safety nets.

Furthermore, changes to Medicaid and SNAP eligibility requirements pose additional challenges for tipped workers. The bill proposes new work requirements that could disproportionately affect restaurant employees, who often face fluctuating work hours based on customer demand. Reports indicate that many service workers are forced to navigate inconsistent scheduling, making it difficult to maintain the necessary hours for program eligibility.

Amid these developments, consumer spending on dining has shown signs of slowing, as Americans adjust their budgets in light of economic uncertainties, such as potential tariff impacts. Data from consumer surveys predict a notable decline in spending on dining out, potentially threatening the livelihoods of many workers in this sector.

Advocates warn that the proposed legislation might inadvertently lead to greater hardship for those relying on essential benefits. The anticipated cuts to SNAP could impact millions, leaving workers like Ordenana questioning their ability to meet basic needs in a fluctuating economy. The discourse surrounding the bill highlights the complex intersection of taxation, labor rights, and the social safety net that many workers depend on for stability.

As these debates continue, the focus will likely remain on finding balanced solutions that support the livelihood of essential service industry workers while addressing broader fiscal concerns.

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