Bernie Moreno, U.S. Senator for the United States Senate, announced the introduction of the One Big Beautiful Bill, which aims to eliminate income taxes on tips, overtime, and social security. He claims this measure would prevent what he describes as the largest tax increase in American history and save families $5,000 per year. The statement was made on X.
"No income taxes on tips, overtime, or social security," said Moreno. "On top of this, the OBBB prevents the largest tax increase in American history, saving each family about $5,000 in extra taxes per year."
The gig economy includes independent workers such as rideshare drivers, delivery workers, and freelancers who often rely heavily on tips as a critical part of their income. According to the U.S. Bureau of Labor Statistics, many participants in the gig economy do not receive employee benefits, making their reliance on tips even more significant. Millions of Americans engage in gig work either as supplemental income or as their primary job.
Under current Internal Revenue Service (IRS) regulations, tip income must be reported and is subject to federal income tax. The IRS reports that tip income accounts for billions of dollars in reported earnings annually. In 2019 alone, tip income reported to the IRS exceeded $27 billion.
The Economic Policy Institute suggests that eliminating taxes on tips could have implications for federal tax revenue, particularly in industries with high levels of tipping. The hospitality and service sectors employ more than 10 million workers in positions where tips are a substantial part of earnings. Data from the Institute indicates that changes in tip taxation policies can have widespread economic effects on these industries.
Moreno was born in Bogotá, Colombia, and immigrated to the United States at age five. He became a U.S. citizen at 18 and built one of the largest auto dealership groups in the country before serving in the Senate. He is also a co-founder of a successful blockchain technology company.