Tax free? Photo: Mark Peterson/Redux
One of Donald Trump’s more ingenious 2024 campaign promises was to exempt tips from federal income taxes. It’s a simple idea and wasn’t as wildly irresponsible as many of his proposals; after all, it’s very difficult to enforce taxation of tips — and as a result, they don’t generate much federal revenue. But the idea would eliminate a headache for workers in service fields and happened to be extremely popular in the key battleground state of Nevada (which Trump ultimately carried by a comfortable 3 percent of the vote), where the hospitality and entertainment industries are very big dogs. Indeed, Kamala Harris endorsed the proposal at an August rally in — you guessed it — Las Vegas.
So it’s no surprise that there was a lot of bipartisan support in Congress for abolishing the taxation of tips. Still, it was a surprise that it passed the Senate unanimously this week, as almost nothing does these days. Senator Jacky Rosen, a Nevada Democrat, simply made a motion to adopt her No Tax on Tips Act by unanimous consent, a maneuver normally reserved for renaming post offices and other routine congressional business. Nobody objected, so one of Trump’s campaign promises took flight even as the rest of his agenda faced a terrible slog through Congress.
Speaking of the “One, Big, Beautiful Bill” (yes, that’s its official title): A provision to repeal taxes on tips is one of a gazillion provisions in that massive budget-reconciliation bill. It’s just a few votes short of passage in the House, as Republican factions are still battling on multiple fronts; the key remaining issues are the deduction for state- and local-tax payments (SALT), which is beloved by blue-state Republicans, and Medicaid cuts, which House Freedom Caucus hard-liners desire.
The delicate political equipoise of the package explains why no one in the House can emulate Rosen and just ram through No Tax on Tips. Take out any popular provision from the reconciliation bill and, like a Jenga tower, the whole thing could collapse. In the House, moreover, unlike the Senate, the majority leadership (i.e., House Speaker Mike Johnson and his Rules Committee) has 100 percent control of what comes to the floor, and all the tears of all the Nevadans cannot convince them to disassemble their dubious handiwork.
Assuming that Trump’s one big beautiful mess eventually makes its way through Congress, tips will be liberated from federal income taxation (at least up to $25,000 for taxpayers earning less than $160,000 in total income). But the issue shows how in today’s Congress, and with today’s Republican Party in control, even the simplest, most popular things get tangled up with the dark and complex plans of the people who now run America.
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