Scott Bessent, United States Secretary of the Treasury, announced via a post on X that tariff revenue will be used to fund immediate tax relief measures. These measures include eliminating taxes on tips, Social Security, and overtime pay.
"Tariff revenue will provide the American people with much-needed income tax relief," said Bessent. "I campaigned on No Tax on Tips, No Tax on Social Security, and No Tax on Overtime. Tariff income could be used for tax relief on all those immediately."
According to Congress, the No Tax on Tips Act introduces a new tax deduction of up to $25,000 for cash tips received in traditionally tipped occupations, provided they are reported to employers for payroll tax purposes. Employees earning over $160,000 in the previous year are not eligible for this deduction. The bill also extends the existing employer payroll tax credit on tipped wages to encompass tips earned in beauty and personal care services such as barbering, nail care, and spa treatments.
The transition to digital tipping platforms has significantly increased the traceability of tip income. According to Kickfin, digital tip jars and electronic payment systems automatically record gratuities, facilitating accurate reporting of tip income by businesses and employees to the Internal Revenue Service (IRS). This enhanced transparency has resulted in higher reported tip earnings and subsequently increased tax revenues from tipped income.
As per CNBC's report, many restaurant workers rely heavily on tips due to their base pay under federal law being just $2.13 an hour—substantially lower than the standard federal minimum wage of $7.25. Employers are required to compensate for any shortfall if tips do not elevate a worker’s pay to meet the minimum wage; however, in practice, tips remain crucial. They account for 23% of restaurant workers’ income nationally and up to 33% in states like Wyoming. In Wyoming specifically, the average restaurant worker earns $11.09 in wages plus an additional $5.34 in tips per hour but still falls short of the $21 an hour needed for basic living expenses.
Bessent was sworn in as the 79th U.S. Secretary of the Treasury in January 2025. He is responsible for overseeing national economic policy, financial management, and efforts against economic threats. A Yale graduate and experienced global investor, he previously led Key Square Capital and Soros Fund Management and has been a strong advocate for financial literacy and education.