Deep Dive No taxes on tips may happen soon. Here’s what it could look like at hotels.
hen Eileen Scott first heard of a proposal to eliminate taxes on tips, W her first thought was, “That’s the greatest idea.” Scott, a cocktail server at Harrah’s Las Vegas, said tips are an important part of her income, and some days, they’re great. But employment as a tipped worker is complicated, she told Hotel Dive. Customers’ tipping habits fluctuate wildly — and her actual tips are often much smaller than her tippers think. “When the guests give [a tip] to you, they give it to you because you took care of them. They give it to you as a gift,” she said. They don’t think about how those tips end up split between the bartender, barback and Uncle Sam, she said. Scott is among a cohort of the hospitality industry — including hotel employees, hotel associations and hotel worker unions — who support the elimination of federal taxes on tipped wages. And that elimination could soon be a reality, as the President Donald Trump-backed taxation and spending reconciliation package — dubbed the One Big Beautiful Bill Act — heads to the Senate after House approval in May. The version passed in the House lays out budgetary priorities including tax cuts, reduced spending on services like Medicaid and additional funding to Trump campaign-promised priorities such as border security. It also contains a
provision that would eliminate federal taxes on tips. The arrival of the bill in the Senate follows the body’s May 20 passage of Republican Sen. Ted Cruz’s No Tax on Tips Act, which outlines similar legislation. But while hotel industry associations and hospitality worker unions support the elimination of taxes on tips, what the legislation will look like — and its potential effects — are still up for debate. A popular idea The American Hotel & Lodging Association is one industry voice advocating for the elimination of federal taxes on tips. “There are a lot of job categories within the hotel industry that benefit from tips — 800,000 individuals, when you add it all up,” AHLA President and CEO Rosanna Maietta told Hotel Dive. “That is significant, and for them to be able to take home more pay that they earn every day matters.” In the run-up to the 2024 presidential election, both Trump and former Vice President Kamala Harris pledged to eliminate taxes on tips. In January, following Trump’s inauguration, Maietta joined the president onstage at a rally in Las Vegas, where she called a no taxes on tips proposal “a crucial step” toward helping tipped workers “keep more of their earned income in their pocket.”
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