Trump Renews Call for No Tax on Tips in Congressional Address

In a recent address to Congress, President Donald Trump reiterated a campaign promise that has drawn attention from service industry workers and employers alike: eliminating federal income tax on tips. This proposal, first introduced during his 2024 campaign, was once again emphasized during his March 2025 speech as a way to provide financial relief to millions of workers who rely on tips as a significant portion of their income.

The Proposal

Trump’s plan would exempt tips from federal income tax, allowing service workers, particularly in industries like hospitality, restaurants, and personal care, to retain more of their earnings. During his address, he positioned the policy as both a form of tax relief and a gesture of appreciation for hardworking Americans in tip-reliant professions.

He called on Congress to pass legislation that would codify this change, asking lawmakers to make the policy effective immediately. If enacted, the move would be a significant shift in the way tip income is treated under the federal tax code.

Potential Impact

According to data cited in various economic analyses, workers in the restaurant and hospitality sectors are among the most affected by federal taxation of tips. The proposal, while not yet detailed in full legislative form, could have far-reaching implications for payroll processing, employee tax filings, and business reporting.

Some experts have noted that eliminating taxes on tips could increase take-home pay, while others have raised concerns about tracking and compliance if tip income is no longer subject to traditional reporting requirements.

What Businesses Should Know

If this policy gains traction and moves toward implementation, employers in tip-based industries should prepare for possible changes in:

• Payroll systems and tax withholdings

• Employee communication and education

• Reporting obligations under IRS regulations

• Financial planning for both individuals and businesses

While no formal legislation has been introduced as of the time of this writing, the renewed focus on the issue means it’s something business owners and HR professionals may want to monitor closely.

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Under U.S. Treasury regulations, any tax advice in this communication is not intended or written to be used to avoid IRS penalties. Tzinberg & Associates provides this information for general guidance only. It does not constitute tax advice, accounting services, investment advice, or professional consulting. Consult a professional adviser before making decisions or taking action, as the information is provided "as is" without any warranties regarding its completeness, accuracy, or timeliness.