Sponsors (33)
The bill increases guaranteed wages, tip‑retention protections, and a tax benefit for many low‑income tipped workers, but it also raises labor and compliance costs for employers that may lead to reduced hours, higher prices, administrative burdens, and narrower eligibility for some workers.
Tipped workers (servers, bartenders, cosmetologists and other low-income tip earners) will receive at least the statutory minimum wage instead of a reduced cash/tipped wage, raising their guaranteed base earnings.
Tipped employees keep their tips and employers that unlawfully use or keep tips can be held liable for the full amount, strengthening workers' ability to recover stolen tips and protecting their direct tip income.
Many tipped workers who report cash tips can claim an above-the-line deduction (available to non-itemizers and protected from miscellaneous floors and overall deduction limits), increasing take‑home pay for lower‑income taxpayers without requiring itemizing.
Businesses that rely on tipped labor will face higher direct wage costs because employers must pay the full statutory minimum to tipped workers, which could lead to reduced staffing or hours for tipped positions, higher prices, or reduced take‑home hours for some workers.
Small businesses and employers will face increased litigation risk and potentially larger damages liability if tips are misused, raising legal and financial exposure.
Employers and payroll administrators must change withholding procedures and recordkeeping to implement the deduction and new wage rules, creating administrative costs and complexity for small businesses.
Based on analysis of 3 sections of legislative text.
Ends the federal tipped subminimum wage, strengthens employer liability for unlawfully kept tips, and creates an above-the-line deduction for qualifying reported cash tips (AGI cap $112,500).
Official title: To amend the Fair Labor Standards Act of 1938 to eliminate the separate minimum wage for tipped employees, and for other purposes.
Introduced February 13, 2025 by Steven Horsford · Last progress February 13, 2025
Eliminates the separate lower minimum cash wage for tipped workers so employers must pay the full statutory federal minimum wage to tipped employees, preserves employee retention of tips (with limited employee-only tip-pooling), and makes employers liable to repay any tips they unlawfully use or keep. It also creates a new above-the-line federal tax deduction for qualifying reported cash tips (with an income cap), available to non-itemizers, and requires Treasury to adjust withholding procedures. The tax changes take effect for taxable years beginning after December 31, 2025.