Economists, watchdogs criticize bipartisan measure as 'egregious' deficit spending ahead of broader tax package.
A key element of the tax-cut package that the Trump administration and congressional Republicans are working to pass got approved by the Senate as a standalone measure, though it carries a significant cost.
The Senate unexpectedly passed the No Tax on Tips Act late Tuesday when Sen. Jack Rosen, D-Nev., spoke in favor of the bill, which Sen. Ted Cruz, R-Texas., introduced earlier this year with Rosen as an original co-sponsor. Rosen asked for unanimous consent to pass the bill, and when no senators on hand objected, it passed the upper chamber.
"No Tax on Tips was one of President Trump’s key promises to the American people, which he unveiled in my state of Nevada, and I am not afraid to embrace a good idea, wherever it comes from," Rosen said of the bill originally drafted by Cruz.
The passage of the Senate's standalone no-tax-on-tips measure occurred ahead of the House's passage of the broader tax package favored by Republicans and President Donald Trump, which also includes a temporary no-tax-on-tips provision. Despite those distinctions, economists have put the cost of the measure at about $10 billion in foregone tax revenue per year.
The standalone No Tax on Tips Act would create a new, permanent federal income tax deduction of up to $25,000 for cash tips for eligible employees working in jobs that receive tips "traditionally and customarily" based on a definition to be established by the Treasury Department. Eligible workers would have to earn less than $160,000 in 2025, a figure that would be adjusted for inflation in the years ahead.