Washington, D.C. — The Republican-passed One Big Beautiful Bill Act (OBBBA) includes a “no tax on tips” provision, which eliminates federal income taxes on the first $25,000 of tips earned by workers making less than $150,000 per year ($300,000 for married filers). A new Center for American Progress column reviews how, despite appearances, this provision will benefit only a small number of workers, and many of those workers will disproportionately suffer financial losses due to the OBBBA’s severe cuts to basic needs programs. The net result is that tipped workers are unlikely to experience significant gains from the OBBBA overall.
To illustrate the wide-ranging effects that coming policy changes will have on tipped workers, this column offers three example profiles that show how households’ balance sheets will change in early 2026. It also reviews how ‘no tax on tips’ is of limited benefit to tipped workers, and how the Medicaid and SNAP cuts from the OBBBA will affect tipped workers. Some of the key takeaways from this column include:
- In six tipped occupations (taxi drivers, personal appearance workers, waiters, and bartenders), together accounting for the majority of tipper workers, 30 percent of workers’ health care was covered by Medicaid or Affordable Care Act subsidies and 15 percent of workers were in a household receiving SNAP benefits.
- Nearly 282,000 workers in these six tipped occupations may be at risk of losing their Medicaid coverage and more than 168,000 workers at risk of losing their SNAP, due to their usual weekly hours falling below or near the OBBBA’s 20-hour work requirement threshold.
- OBBBA cuts to the Supplemental Nutrition Assistance Program (SNAP) will total up to $186 billion over the next decade, or almost six times the impact of “no tax on tips,” while the legislation’s cuts to Medicaid and the Children’s Health Insurance Program (CHIP) total about $900 billion, or 28 times the impact of “no tax on tips.”
“‘No tax on tips’ is a symbolic tax cut that is very limited and poorly targets the workers who need tax relief the most,” said Corey Husak, director of tax policy and author of the column. “Of the small number of workers who will benefit, many will also fall victim to the bill’s cuts to basic needs programs that many tipped workers rely on, from Medicaid to SNAP.”
Read the column: “Despite ‘No Tax on Tips,’ Trump’s Big ‘Beautiful’ Bill Is Bad for Tipped Workers” by Corey Husak
For more information or to speak with an expert, please contact Sarah Nadeau at [email protected].