Donald Trump signed Bill to make tips tax-free!
On July 4, 2025, President Donald Trump enacted the One Big Beautiful Bill Act, a major reform of the federal tax system. This legislation has generated significant discussion, framed by its backers as essential financial relief for American workers.
Supporters of the law emphasize its tangible benefits for individuals. It makes previous tax cuts permanent and introduces several new provisions. These specifically include making overtime pay and all tips exempt from federal income tax.
Additionally, the act expands deductions available to senior citizens. While tips must still be reported to employers, the change means millions in the service industry will see direct increases in their take-home earnings.
Senator Ted Cruz captured the supportive viewpoint, stating, “These workers deserve to keep more of what they earn.” Proponents argue the law effectively boosts income without requiring employers to raise base wages.
Critics, however, have raised substantial concerns. They warn the legislation could add an estimated $3.4 trillion to the federal deficit over the coming decade. Opponents also contend the changes unfairly favor specific groups of workers.
There are further criticisms about potential for manipulation in how employees are compensated. The primary objection is that the law prioritizes immediate economic benefits over long-term fiscal responsibility and broader fairness.
Despite this ongoing debate, the immediate impact is already being felt. Many workers within the hospitality sector report seeing higher net pay in their paychecks following the law’s passage.
