Cruz is advocating for the bill, which seeks to exempt tips from federal income tax and was a key promise made by Trump during his campaign. The legislation is designed to assist millions of American workers who depend on tips as a crucial part of their earnings.

“President Trump pledged to the American public that he would abolish taxes on tips. In Congress, I established a bipartisan, bicameral coalition to achieve this goal, and in the Senate, I introduced the No Tax on Tips Act. Today, I collaborated with Senator Rosen on the Senate floor to ensure the bill’s passage,” Cruz stated.

Cruz highlighted the potential benefits of the legislation for working-class families: “This law will significantly affect millions of Americans by safeguarding the hard-earned income of blue-collar workers, who are often living paycheck-to-paycheck. I urge my colleagues in the House to approve this vital bill and forward it to the President for his signature.”

The “No Tax on Tips Act” specifies that “cash tips” encompass checks, cash, credit card payments, and debit card transactions. Workers can claim a full 100% deduction for wages received on their federal income tax returns.

The revised version of the bill includes “guardrails” to guarantee that only tipped employees receive the exemption. Cruz aims to reduce taxes and generate additional employment opportunities, which is the primary focus of this congressional initiative.

He was instrumental in the 2017 tax reform that greatly lowered taxes for both individuals and businesses, and he has consistently advocated for the permanence of those tax reductions.

Cruz also significantly contributed to the passage of the USMCA trade agreement, which he regards as a victory for the industries of Texas, particularly in agriculture. The U.S. Chamber of Commerce honored him with the esteemed “Spirit of Enterprise” award for his efforts to support Texas businesses.

As reported by CNBC, the bill is currently in the House, which is under Republican control.

Republicans proposed a tax incentive for tipped workers as part of a tax reform initiative revealed by the Senate Finance Committee on Monday. In the upcoming weeks, GOP lawmakers will strive to pass their multitrillion-dollar megabill.

The Senate proposal, which aims to deliver on President Trump’s campaign promise of “no tax on tips,” closely resembles a provision that was enacted by House Republicans in May as part of a domestic policy legislation.

In all versions, the tax relief is designed as a deduction for qualifying gratuities. The Senate bill characterizes such tips as those given in cash, charged, or received as part of a tip-sharing arrangement.

This measure would permit taxpayers, including both employees and independent contractors, to claim it from 2025 to 2028. Filers may benefit regardless of whether they itemize deductions on their tax returns or opt for the standard deduction.

Matt Gardner, a senior scholar at the Institute on Taxation and Economic Policy, mentioned in an email that the Senate proposal diverges from the House version in two significant respects.

Firstly, Gardner pointed out that the Senate plan would establish the tax deduction at $25,000 annually, whereas the House version would leave it without a cap.

He also highlighted that the income thresholds operate differently under the Senate legislation.

The House measure removes the tax deduction once an individual’s annual income reaches $160,000.

Conversely, the Senate version would gradually reduce the value of the tax deduction if an individual’s income surpassed $150,000, or $300,000 for married couples. The Senate would decrease the tax break’s value by $100 for every $1,000 of income that exceeds the threshold.

Senate Republicans, similar to their counterparts in the House, would limit the tax benefit to tipped employees in positions that have “customarily and regularly” received tips as of December 31, 2024.

The bill stipulates that the Secretary of the Treasury of the United States must release a list of these positions within 90 days following the enactment of the legislation.

Prominent Democrats, including New York Senator Chuck Schumer and Nevada Senator Jackie Rosen, have commended the proposal.