The “One Big, Beautiful Bill Act,” passed by the House on May 22, 2025, eliminates taxes on tips for workers earning under $160,000 and taxes on overtime pay through 2028, fulfilling Trump’s campaign pledges. The Senate unanimously passed a separate “No Tax on Tips Act” on May 20, allowing a $25,000 deduction for cash tips, per the IRS. However, critics argue these measures, costing $124 billion per the CBO, benefit few low-income workers who already owe little tax.
The taxes on tips provision targets servers and hairstylists, requiring a Social Security number to exclude undocumented workers. The taxes on overtime pay deduction has similar guardrails, barring high earners. The bill also offers a tax deduction for American-made cars and a small business deduction increase to 23%, alongside extending the 2017 Tax Cuts and Jobs Act. A remittance tax on non-citizens, including H-1B holders, adds complexity.
Senate debate will scrutinize these provisions, with Democrats questioning their efficacy. The IRS, facing staff reductions, may struggle with enforcement, per the Journal of Accountancy. The foreign earnings tax, upheld by the Supreme Court, adds further compliance burdens. While popular, the tax breaks may not deliver significant savings for low earners, per the Urban-Brookings Tax Policy Center.
