Some segments of the U.S. restaurant industry don’t support President Donald Trump’s proposal to eliminate federal taxes on tips, saying it would help too few people and obscure bigger issues in the way tipped workers are paid.
The Independent Restaurant Coalition, which represents nearly 100,000 restaurant and bars, has appealed to Congress to reconsider the proposal, which is part of the president’s spending bill. Even some workers who rely on tips say they oppose making them tax-deductible.
“I think there’s a huge hole in this concept of ‘no tax on tips’ because a lot of restaurant workers aren’t receiving tips in the first place,” said Elyanna Calle, a bartender in Austin, Texas, and president of the Restaurant Workers United union. “It’s not helping most kitchen workers, and oftentimes those are the people who are being paid the least.”
For now, making tips tax-free appears to have broad support among lawmakers. Both Trump and his Democratic rival in last year’s U.S. presidential election, former Vice President Kamala Harris, campaigned on the concept.
The House included it in a tax cuts package approved last month. The bill would eliminate 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 Senate Finance Committee passed a modified version on Monday. Senators capped deductions at $25,000 and want to phase them out for individuals whose income exceeds $150,000. Eligibility would be based on earnings as of Dec. 31, 2024.
Both the House and Senate committee measures would apply through the 2028 tax year. The Finance Committee specified that “cash tips” qualify but said the term applied to tips paid in cash, charged to credit cards or received from other employees under a tip-sharing arrangement.
Wary of wading into politics, many restaurant chains contacted by The Associated Press about tax-free tips didn’t respond or referred questions to the National Restaurant Association, including Waffle House, The Cheesecake Factory, First Watch and the parent companies of Olive Garden, Applebee’s and Chili’s.
The National Restaurant Association, a trade organization that represents nearly 500,000 U.S. restaurants and bars, applauded the House’s passage of Trump’s spending bill and said it wants to see tax-free tips. The association estimates the measure would