Some groups in the U.S. restaurant industry do not support President Donald Trump’s plan to exempt tips from federal taxes, believing that the move would benefit too few people and mask larger problems in the tipped workers’ pay system.
According to the Associated Press, the Independent Restaurant Coalition, which represents nearly 100,000 restaurants and bars, has called on Congress to reconsider the proposal as part of the president’s budget. Even some workers who rely on tips for their livelihoods have expressed opposition to making tips tax-free.
“The concept of ‘tax-free tips’ has a big loophole because many restaurant workers do not receive tips at all,” said Elyanna Calle, a bartender in Austin, Texas and president of Restaurant Workers United. “This does not help the majority of kitchen workers, who are often the lowest paid.”
Currently, making tips tax-free seems to have broad support among lawmakers. Trump and former Vice President Kamala Harris, his Democratic opponent in last year’s U.S. presidential election, have both made similar claims during their campaigns.
The House of Representatives passed a tax relief package last month that includes a tip exemption. The bill exempts tip income from federal income tax for workers in traditional tipped jobs who make up to $160,000 in 2025.
The Senate Finance Committee also passed a revised version on Monday. Senators capped the deduction at $25,000 and phased it out once an individual earns more than $150,000. Eligibility would be based on income as of Dec. 31, 2024.
Both the House and Senate committee versions would apply through the 2028 tax year. The Finance Committee specified that “cash tips” qualify, and that the term applies to tips paid in cash, paid by credit card or distributed among employees.
To avoid getting political, several restaurant chains contacted by the AP (including Waffle House, Cheesecake Factory, First Watch, and the parent company of Oliver’s Garden, Applebee’s and Chili’s) did not respond or referred inquiries to the National Restaurant Association.
The National Restaurant Association, which represents nearly 500,000 American restaurants and bars, expressed support for the House of Representatives’ passage of Trump’s budget and said it hopes to see the tax exemption policy for tips implemented. The association estimates that the measure will benefit more than 2 million waiters and bartenders.
However, the total number of employees employed by the U.S. restaurant industry exceeds 12 million, including dishwashers and chefs. The Independent Restaurant Alliance believes that the “tip tax exemption” proposal leaves out too many types of work.
