NEW YORK (AP) 鈥� President Donald Trump's 鈥� 鈥� pledge became a catchphrase for his 2024 campaign. Now it's inching closer to reality.
The idea is firmly planted in the House Republicans . And in a surprise move, the Senate voted this week to unanimously approve the idea.
The proposal has widespread support from the public, lawmakers in both parties and employers who believe such a law will bring relief to the working class. But many critics say that it would come with an enormous cost to the government while doing little to help the workers who need it most.
Here's a look at the proposal and its potential impact:
What's in the 'No Tax on Tips鈥� provision?
It would create a new tax deduction eliminating federal income taxes on tips for people working in jobs that have traditionally received them, as long as they make less than $160,000 in 2025. The Trump administration would publish a list of qualifying occupations within 90 days of the bill's signing.
Only tips reported to the employer and noted on a worker's W-2, their end-of-year tax summary, would qualify. Payroll taxes, which pay for Social Security and Medicare, would still be collected along with state and local taxes.
If adopted, the proposed deduction is set to expire after four years. Congressional budget analysts project the provision would increase the deficit by $40 billion through 2028. The Committee for a Responsible Federal Budget, an advocacy group, projects the cost would be $120 billion over a decade if the tip exemption is made permanent.
What did Trump say in the campaign about federal taxes on tips?
Trump made the promise during a , where the service sector drives the economy, as part of his pitch to working-class voters struggling with rising costs.
Segments of his base eagerly spread the word, writing the catchphrase on their restaurant receipts or talking to their barbers about it while getting a trim.
Trump offered few details at the time, but later made to eliminate taxes on other forms of income, including and Social Security payments. Those ideas, along with a tax deduction for auto loan interest, are also included in the GOP's budget bill.
鈥淣o tax on tips鈥� was 鈥� with limits 鈥� by the influential Culinary Union, which represents Las Vegas Strip hospitality workers, Nevada's Democratic senators and Vice President Kamala Harris, Trump's Democratic rival.
How could it impact workers?
Experts say some middle-income service workers would benefit from a tax break but warn that it could heighten inequities.
鈥淚f your goal is to help the poorest service workers, this is probably not the way to do it,鈥� said Michael Lynn, a professor of services marketing at Cornell University whose research largely focuses on tipping and other consumer behavior.
About a third of tipped workers make too little to owe income taxes. Those workers won't see any savings, so its benefits will accrue to tipped workers with higher incomes, Lynn said.
鈥淚t鈥檚 overlooking non-tipped workers who need the help just as badly, and it鈥檚 giving the benefit predominantly to the least needy of the tipped workers,鈥� Lynn said.
The median age for tipped workers is 31, a decade younger than the median non-tipped worker, and they tend to make lower wages, according to the Yale Budget Lab.
Among tipped workers who make enough to owe Uncle Sam, the average tax cut would be about $1,800, according to the Urban-Brookings Tax Policy Center.
The measure also .
What do employers say?
The National Restaurant Association is among industry groups that have been strong backers of a 鈥淣o Tax on Tips鈥� provision. When reached for comment Wednesday, a spokesperson pointed The Associated Press to a previous statement following the legislation鈥檚 introduction in January.
鈥淓liminating taxes on tips would put cash back in the pocket of a significant number of workers in the restaurant and food service industry and could help restaurant operators recruit industry workforce,鈥� Sean Kennedy, executive vice president of public affairs for the association, said at the time 鈥� calling the No Tax on Tips Act 鈥渟ensible legislation鈥� that he said includes 鈥渇iscally responsible鈥� protections.
And in Nevada, the Culinary Workers Union specifically credited the state鈥檚 two Democratic senators, Catherine Cortez Masto and Jacky Rosen, with working with Republicans to push the legislation forward 鈥� and called on the House to 鈥済et this done for working families.鈥� The union represents about 60,000 casino and hotel workers across the state, including bartenders, food servers and cocktail servers who rely on tips.
But other groups representing workers shared criticism of the legislation.
One Fair Wage, an advocacy group made up of nearly 300,000 service workers and over 1,000 restaurant employers pushing to raise the minimum wage, said the measure would offer 鈥渕oderate relief for some鈥� but is part of a tax package that 鈥渏ust helps the richest while leaving the vast majority behind.鈥�
鈥淔or all the bipartisan celebration 鈥� this bill is a distraction from the real fight,鈥� Saru Jayaraman, president of One Fair Wage, stated 鈥� again stressing that it was time to raise the minimum wage. The nonprofit also calls for ending tip credits that allow lower base wages for tipped workers in many states.
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Cooper reported from Phoenix. Associated Press writer Rio Yamat contributed to this report from Las Vegas.
Wyatte Grantham-philips And Jonathan J. Cooper, The Associated Press
