Republicans have talked up a new federal tax break for tipped workers included in last summer's so-called Big Beautiful Bill. But a progressive research group in Ohio reports the "no tax on tips" provision actually won’t benefit a big percentage of tipped workers.
Policy Matters Ohio Researcher Molly Bryden said the "no tax on tips" provision gives the biggest tax break to those with the highest tipped wages. And she said about a third of Ohioans who get tips won’t benefit from the new policy.
“Because about a third of tipped workers make too little to actually owe federal income taxes in the first place,” Bryden said in an interview.
Bryden said the tips provision is only a small part of the overall tax benefits in the law, and those who do benefit from it should not get too used to having it.
"The cost of the “no tax on tips” provision is estimated at $32 billion and it ends in four years,” Bryden said. “Whereas if you compare it to the pass-through business income deduction for qualified business income, those tax cuts were estimated $737 billion and they were made permanent by the same piece of legislation.”
Bryden said some tipped workers will benefit more than others. For example, she said a bartender/server would see a bigger advantage than a hotel housekeeper. increasing enforcement of wage theft and raising the minimum wage.
Read the full report here.
