Things to know about 'no tax on tips,' Trump's tax pledge that's included in GOP budget bill

NEW YORK (AP) — President Donald Trump's “ no tax on tips ” pledge became a catchphrase for his 2024 campaign. Now it's inching closer to reality. The idea is firmly planted in the sprawling tax cuts package Republicans are hashing out in the House and aiming to pass in the coming days. 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’ 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. 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 during the campaign about eliminating federal taxes on tips? Trump made the promise during a campaign stop in Las Vegas, 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 similar pledges to eliminate taxes on other forms of income, including overtime wages and Social Security payments. Those ideas, along with a tax deduction for auto loan interest, are also included in the GOP's budget bill. “No tax on tips” was later embraced — with limits — 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.