On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBB) into law. The measure makes permanent the sweeping tax reductions that were set to expire in 2025, while also adding new benefits such as tax-free overtime pay and an extra deduction for seniors.
According to the Congressional Budget Office, OBBB is expected to increase federal deficits by $3.4 trillion over the next decade. Supporters argue the law delivers financial relief to millions of Americans, while critics say it disproportionately benefits select groups and worsens the nation’s debt outlook.
One of the most notable provisions under OBBB is the No Tax on Tips Act, which has already passed the U.S. Senate. The measure allows tipped workers to deduct up to $25,000 of tip income from their taxable earnings. This directly impacts millions of service industry employees who often rely on tips to make ends meet.
Currently, tipped workers must report tips as taxable income, and employers are required to withhold taxes. If enacted, tips would still need to be reported but would no longer be subject to federal income taxes. Wages and employer-paid bonuses would remain taxable.
The bill excludes automatic service fees, such as the 20% gratuities often added for large parties. It also does not apply to high-income earners in Specified Service Trades or Businesses (SSTBs), such as law, finance, and consulting.
Senator Ted Cruz of Texas, who introduced the bill with Senator Jacky Rosen of Nevada, framed it as a matter of fairness. “These workers are putting in long hours and living paycheck to paycheck. They deserve to keep more of what they earn,” Cruz said.
Senator Rosen emphasized the importance of tipped workers to economies like Nevada’s. She described them as “the backbone of the economy” and said the bill offers “the respect and support they deserve.”
Supporters also argue the legislation will ease burdens on small businesses, increase take-home pay, and help stabilize tourism-dependent economies.
