Tipped Workers Deserve Better: Rep. Vasquez Vows to Pass TIPS Act, Permanently Repealing Federal Taxes on Tips

Strategic Insights -

U.S. Representative Gabe Vasquez (NM-02) stands in solidarity with workers at Barelas Coffee House in Albuquerque, advocating for the "no tax on tips" policy and increasing the minimum wage for tipped workers. Vasquez is spearheading the TIPS Act, a measure aimed at making permanent the repeal of federal income taxes on tips and ending the sub-minimum wage for tipped workers. The current version of the "no tax on tips" policy under the Republican tax law is temporary and only benefits select workers, who will only see the benefits when they file annual federal taxes for 2025-2028. Tipped workers in New Mexico earn a subminimum wage of $2.13/hour before tips, placing them below the poverty line.

Key Takeaways:

  • The current version of "no tax on tips" under the Republican tax law is temporary and expires at the end of 2028.
  • One in three tipped workers and two-thirds of restaurant workers already pay $0 in federal income tax, so they will not benefit from the temporary policy.
  • Tipped workers in New Mexico earn a subminimum wage of $2.13/hour before tips, which is below the poverty line.
  • The TIPS Act, spearheaded by Rep. Vasquez, aims to permanently eliminate federal income taxes on tips and end the sub-minimum wage for tipped workers.
  • The act would increase the minimum wage for tipped workers to ensure they can earn a living wage.
  • Rep. Vasquez is working with One Fair Wage to hear the concerns of workers and advocates about the impact of the Republican tax law on their ability to make ends meet.

Statistics:

  • More than one in three tipped workers pay $0 in federal income tax based on their tax bracket.
  • Two-thirds of restaurant workers pay $0 in federal income tax.
  • The current sub-minimum wage for tipped workers in New Mexico is $2.13/hour before tips.
  • The Republican tax law expires at the end of 2028.
  • The TIPS Act aims to permanently repeal federal income taxes on tips and end the sub-minimum wage for tipped workers.

Sources:

  • US Representative Gabe Vasquez's (NM-02) statement on August 18, 2025.
  • The text of the TIPS Act, H.R. 1314.
  • Data on the current sub-minimum wage for tipped workers in New Mexico.