Roses Have Thorns: The Hidden Stings in the “No Tax on Tips Act”

On the surface, the “No Tax on Tips Act” smells like a bouquet of roses. Unanimously endorsed by the Senate and championed by President Punk as a key part of his “big, beautiful bill,” the proposal to exempt tips from federal income tax for many service workers seems like a straightforward win. Who wouldn’t want wait staff, bartenders, stylists, and delivery drivers—the backbone of so many service industries—to keep more of their hard-earned gratuities? It’s an idea with broad populist appeal, promising a fragrant boost to the take-home pay of millions.

But as Washington Post columnist Michelle Singletary and various economic analyses suggest, lurking beneath this appealing bloom are some mighty big thorns. This seemingly simple tax break could ignite a new level of “tipping resentment,” create a costly ripple effect for both consumers and workers, and ironically, leave many feeling shortchanged. Before this measure is fully enshrined in the federal budget, it’s crucial to look past the sweet scent and examine the pricklier realities.

The Alluring Bloom: A Tax Break for Tipped Workers

The core promise is attractive: eligible employees (reportedly those earning under $160,000 annually) would receive a federal income tax deduction for cash tips, potentially up to $25,000 a year. The intention is clear: put more money directly into the pockets of workers who often rely on fluctuating gratuities to make ends meet. For industries where tipping is customary, this sounds like overdue relief.

Thorn #1: Not All Roses Are For Every Gardener

The first thorn emerges when we look at who actually benefits. An analysis from the Budget Lab at Yale University, cited by Singletary, points out a crucial flaw: many lower-income tipped workers already pay little to no federal income tax. For them, a new deduction offers no tangible financial boost. The rose, it seems, might not be for everyone in the garden, especially those who arguably need its fragrance most.

Thorn #2: Intensifying “Tip Fatigue” and Consumer Resentment

For consumers, this tax break could add a new irritant to the already festering wound of “tip fatigue.” A Bankrate survey last year found roughly one in three Americans already feel tipping is “out of control.” As one reader lamented to Singletary, the whole system feels “dumb” and arbitrary. If tips become tax-free for many workers, will consumers feel they are now being asked to subsidize not just low wages, but also a government tax break? The frustration with “tipflation”—the ever-present payment screens defaulting to 15%, 20%, or 25% tips while the server hovers—could reach a boiling point.

Thorn #3: More Pressure, More Awkwardness

The Economic Policy Institute (EPI) warns that this tax incentive could “expand the use of tipped work… potentially leading to consumers being asked to tip on virtually every purchase.” Those ubiquitous cashless payment devices, with their pre-set high tip options, already make it awkward and intimidating to leave less. This new dynamic could amplify that pressure, turning more routine transactions into uncomfortable social calculations.

Thorn #4: Undermining Fair Wages – A Thorny Shift for Workers

Perhaps the most significant thorn is the potential impact on base wages. Tipping, by its nature, transfers some of the responsibility for providing a living wage from the employer to the customer. Experts cited by Singletary worry that if a large portion of an employee’s income (untaxed tips) comes directly from customers, employers might feel even less inclined to offer competitive base pay. This could further entrench low statutory minimum wages (the federal minimum has been stuck at $7.25 since 2009) and create greater financial instability for workers whose income becomes even more dependent on the whims of tipping culture. The EPI also suggests this could “undercut efforts to raise compensation for rideshare, delivery, and other gig/app-based workers.”

Thorn #5: The Risk of Wilting Tips – A Backlash Bloom?

Ironically, a tax break for tipped workers could lead some consumers to tip less. The r/EndTipping subreddit, with its 35,000 members, is a testament to a segment of the public that already views tipping as unfair and inconsistent. Posts cited by Singletary reveal some users explicitly stating they’ll reduce or eliminate tips if they become untaxed for the recipient (“If I have to pay tax, so should they… not tip at all”; “I will at LEAST move to 10%”). If this sentiment spreads, any tax benefit for workers could be entirely negated by a decline in overall tip income, leaving them with more unpredictable earnings.

Conclusion: Look Carefully Before Picking This Rose

The “No Tax on Tips Act,” while smelling sweet on the surface, carries a significant number of potential thorns. It risks inflaming consumer resentment, putting more pressure on customers, discouraging employers from paying living wages, and creating greater income volatility for the very workers it aims to help—all while potentially offering no real benefit to the lowest earners in the tipped economy.

As this proposal moves forward, likely as part of the larger federal budget, policymakers would do well to look beyond its populist bloom. The goal should be to cultivate a system of fair, stable, and livable wages for all workers, not to simply rearrange the thorns in an already unpopular and often inequitable tipping system. This rose, beautiful as it may initially appear, requires very careful handling.