Senator Cruz has reintroduced a bill to exempt tips from federal income taxes

One of President-elect Donald Trump’s most popular campaign promises was to eliminate the tax on tips for working Americans.

Now, Congress is helping him fulfill that promise, FOX Business has learned.

On Thursday, Texas Republican Sen. Ted Cruz reintroduced a bipartisan bill he first pushed last year to exempt tips from service workers from federal income tax. The redacted text of the bill was obtained exclusively by FOX Business.

If passed and signed into law, the bill would amend the Internal Revenue Service Code to allow Americans working in the food and beverage and beauty services industries to receive a 100% rebate of up to $25,000 on cash and non-cash tips. Employees earning more than $150,000 are not exempt from the tip tax.

It also partially fulfills Trump’s broad campaign promise to extend tax cuts to middle-class Americans and small businesses amid Biden-era inflation.

“Americans in many industries rely on wages to make ends meet,” Cruz said in an exclusive statement to FOX Business. Today, I’m introducing the Bipartisan Tax on Tips Act—legislation I wrote to fulfill President Trump’s promise. Stop the practice of taxing voluntary tips.”

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The law is not without its critics. At President Biden’s expense, the U.S. budget deficit is now nearly $2 trillion — historic levels except when the U.S. government shut down businesses during COVID and issued free cash to make up the difference. The tax cuts could add to the deficit and pressure on the recently sold bond market, which could drive interest rates higher amid fears of a crisis, critics say.

Some have raised concerns about the practicality of taxing tips because they earn below the federal income tax threshold and may not benefit from such a tax deduction.

Cruz first introduced the legislation in June of last year following one of Trump’s campaign rallies, where he touted the idea of ​​eliminating the tax on tips to woo service workers, who make up 40 percent of the U.S. workforce. Given that Republicans were in the minority in the last Congress, the Cruz bill, which was supported only by Republicans, was not voted on.

This time, the bill was signed by Democratic Sens. Jackie Rosen, D-Nev., Catherine Cortez Masto, D-Nev., and Republicans Steve Daines, R-Mont., and Pete Ricketts, R-Neb. A companion bill has been introduced in the House by Rep. Vern Buchanan, a Republican from Florida.

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An anonymous waitress works in a restaurant and counts tips or a customer’s payment. The IRS released a notice on Monday regarding a proposed tip program. (iStock/iStock)

Cruz told FOX Business that he is confident the revised legislation will pass quickly, given the Republican Party’s control of the House and Senate and its desire to meet the economic needs of working Americans due to inflation.

“I’ve long believed that the GOP should be the party of bartenders, waiters and waitresses, and this bill is an important step toward making sure we’re addressing the economic needs of working Americans,” he said. “This labor bill will provide relief to families who have experienced increased costs due to the Biden administration’s inflationary policies.”

The bill has already received support from industry groups including the National Restaurant Association, the Professional Beauty Association and the International Franchise Association.