Sen. Cruz introduces bill to make tips exempt from federal income taxes

California fast food price hikes

It's all in an effort to offset the minimum wage increase for fast food workers in California that took effect April 1.

Sen. Ted Cruz, R-Texas, on Thursday introduced legislation that would exempt tips from the federal income tax.

The text of the "No Tax on Tips Act" was obtained exclusively by FOX Business, days after the Texas Republican announced his plans to file it this week on "Sunday Morning Futures." The bill is co-sponsored by fellow Republican Sens. Steve Daines of Montana, Rick Scott of Florida and Kevin Cramer of North Dakota.

"American workers in dozens of industries depend on tipped wages to support themselves," Cruz said in a statement. "Today, I am introducing pro-worker legislation, the No Tax on Tips Act, to ensure they get to keep all of those tips. This legislation is a common-sense, pro-worker bill that will help families deal with the historic inflation caused by the Biden administration."

Daines, in his own statement, said: "Joe Biden’s sky-high inflation has hit hardworking Americans especially hard. Providing a much-needed tax cut for working families will help offset Biden’s high prices and get people back in the workforce."

If passed and signed into law, the legislation would amend Internal Revenue Service code to exempt cash tips from federal income tax by allowing taxpayers to claim a 100% above-the-line deduction at filing for tipped wages. Cruz's office noted that "cash tips," as cited in the bill, include those received in actual cash, as well as via credit and debit card charges, and checks.

The senators' legislation follows a similar bill filed by Republicans in the House earlier this week, the "Tax Free Tips Act." Both measures were drawn up after former President Trump, the presumed GOP nominee for president, promoted the idea of ending taxes on tips earlier this month.

Trump had raised the idea during his June 9 rally in Las Vegas, telling the crowd, "When I get into office, we're not going to charge taxes on tips, people making tips."

"We're going to do that right away, first thing in office, because it's been a point of contention for years and years and years," Trump said.

Multiple GOP senators said he again raised the idea in a closed-door meeting with them last week.

Currently, both cash and non-cash tips are subject to federal income taxes.

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