“Tax Free Tips Act of 2024” Submitted to Congress to Scrap Federal Tips on Taxes

U.S. Congressmen Representatives Matt Gaetz (FL) and Thomas Massie (KY), introduced the “Tax Free Tips Act of 2024” in the second session of the 118^th Congress in the House of Representatives on June 18.

The bill is designed to provide financial relief to service industry workers by scrapping federal income and employment taxes on tips and was co-sponsored by Rep. Marjorie Taylor Greene (GA). It was inspired by former President Donald Trump’s “plan to end federal taxation on income derived from tips. during his visit to Capitol Hill on June 13,” as reported by the Washington Times.

“As the cost of living continues to rise, the hardworking men and women in the service industry, many of whom may be working a second job to make ends meet, must be allowed to keep every dollar of tip money they earn. I am proud to join with Rep. Thomas Massie in co-leading this important tax-relief legislation” stated Congressman Gaetz in a press release from his office the same day.

In Florida, the U.S. Department of Labor Wage and Hour Division states, “The minimum wages for tipped employees is $12 and is “scheduled to increase by $1.00 every year on September 30th until reaching $15.00 on September 30, 2026.”

Taxing tips began in 1982 after Congress enacted the Tax Equity and Fiscal Responsibility Act (TEFRA) as a means of generating revenue through a series of tax increases, spending cuts, and other measures. The IRS considers tips to be taxable income, whether they’re received as cash, gift cards, or physical gifts.

Breitbart News cites Massie as stating, “Taxing tips is regressive and goes against American tradition. But now digital payments allow the government to tax every transaction, even those that historically have not been taxed. With inflation raging, it only makes sense to eliminate the tax on tips and provide relief to working folks.”

Lee Valverde, owner and stylist at Magnolia Salon in Fort Walton Beach, said, “Income taxes on tips affects not just the service staff but also the owner of a business.” She explained that not only does she and other stylists at the salon have to report and pay taxes on tips received but then also incur a processing fee for tips included on a credit card or other digital payments. “Basically,” Valverde added, “the taxes and credit card fees just take away my tip, and I only make the price of the service.”

Not everyone agrees. Lisa Spielman, a Fort Walton Beach resident employed as merchandiser for McCormick Distilling, said, “It is money earned. It would not be fair that you wouldn’t have to pay taxes on it—plus established places are paying a higher wage per hour now.”

You can read the actual legislative bill proposed to end federal taxation on income derived from tips here.