By B. Rao | February 26, 2025 | MoneyOye.com
Key Takeaways:
- Congress is debating two major tax cut bills: The No Tax on Tips Act and The KEEP Act, which would eliminate taxes on tips and overtime pay.
- The House has passed a controversial budget resolution, including $880 billion in Medicaid cuts over 10 years.
- Trump supports the tax cuts, but the plan faces opposition due to concerns over funding shortfalls.
- Social media is on fire, with #NoTaxOnTips and #SaveMedicaid trending on X as workers and advocates clash over the proposals.
Congress Moves on Tax-Free Tips and Overtime Pay
Washington is in the middle of a high-stakes tax debate, with new legislation aimed at eliminating federal income taxes on tips and overtime pay. These proposals—H.R. 482 (No Tax on Tips Act) and H.R. 405 (KEEP Act)—were introduced in early 2025 but have yet to pass, remaining in committee as of February 26.
What These Bills Would Do:
- No Tax on Tips Act: Would eliminate income taxes on cash tips, allowing service workers to keep 100% of their earned tips tax-free.
- KEEP Act (No Tax on Overtime Pay): Would exclude overtime wages from taxable income, meaning workers keep more of their hard-earned extra hours.
What’s Next?
While these tax cuts are popular among workers, the funding question remains unresolved. Critics argue that exempting tips and overtime could reduce government revenue by $100 billion (tips) and up to $3 trillion (overtime) over 10 years.
Budget Showdown: Tax Cuts vs. Medicaid Slashes
The House narrowly passed a budget resolution (217-215) that lays the groundwork for $4.5 trillion in tax cuts while also including $880 billion in Medicaid cuts over the next decade.
Potential Medicaid Impact:
- 20 million people could lose Medicaid coverage under the proposed cuts.
- States would see a $186 billion drop in federal funding, forcing tighter eligibility rules or service reductions.
- The House plan offsets tax cuts with these spending reductions, drawing fierce backlash.
The Political Divide:
- Republicans argue: “Tax cuts will help working Americans, and Medicaid reform is necessary for long-term sustainability.”
- Democrats counter: “Slashing Medicaid to fund tax breaks for higher-income workers is immoral and dangerous.”
With Trump fully backing these cuts, the battle over #SaveMedicaid is only heating up.
Key Players Driving the Debate
Rep. Thomas Massie (R-KY)
- Supports the No Tax on Tips Act but voted against the budget resolution, citing concerns over federal spending.
- Libertarian-leaning, pushing for lower taxes but fiscal responsibility.
Speaker Mike Johnson (R-LA)
- Driving the budget resolution, aligning with Trump’s tax cut agenda.
- Managing GOP divisions on Medicaid cuts.
President Donald Trump
- Champions tax cuts, including eliminating overtime and tip taxes and extending the 2017 Tax Cuts and Jobs Act (TCJA).
- Supports Medicaid reductions as part of a “big, beautiful budget” to streamline federal spending.
Social Media Reacts: #NoTaxOnTips vs. #SaveMedicaid
🔥 Trending on X (Twitter):
- #NoTaxOnTips – Supporters praise higher take-home pay for service workers.
- #SaveMedicaid – Critics argue funding cuts hurt vulnerable communities.
- #TrumpTaxCuts – Divided views on whether Medicaid reductions justify tax breaks.
📢 Public Reactions:
💬 “Finally, workers get to keep what they earn! No tax on tips = real economic relief.”
💬 “Cutting Medicaid to fund this? Millions will lose healthcare just to make some people’s paychecks slightly bigger.”
💬 “Overtime should NEVER be taxed. The government is stealing from the hardest-working people.”
Comparison: Tax Cuts vs. Medicaid Reductions
| Aspect | No Tax on Tips | No Tax on Overtime | Medicaid Cuts |
|---|---|---|---|
| Status | Introduced, not passed | Introduced, not passed | Proposed in budget resolution |
| Projected Cost | $100 billion over 10 years | $225 billion – $3 trillion | $880 billion reduction |
| Who Benefits? | Tipped workers | Overtime earners | Federal budget, deficit reduction |
| Main Controversy | Expands reliance on tipped work | Funding Social Security/Medicare | Millions could lose healthcare |
| Key Supporters | Trump, Massie, Buchanan | Fulcher, Trump | House Republicans, Trump |
| Public Opinion | Mixed | Strong support | Highly controversial |
Final Thoughts: A Win for Workers or a Healthcare Crisis?
💰 Supporters argue:
- “Tax cuts boost take-home pay and economic growth.”
- “Workers deserve tax relief, especially in low-wage jobs.”
⚠️ Critics warn:
- “Medicaid cuts will hurt millions to fund wealthier tax breaks.”
- “Exempting overtime wages could deplete Social Security & Medicare funding.”
This tax-and-budget fight will shape America’s economic landscape for years to come. With Congressional showdowns ahead, the question remains:
👉 Should workers get tax-free wages, even at the cost of healthcare funding? Drop your thoughts in the comments!
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📖 Author Bio
B. Rao is a finance and policy expert covering U.S. tax law, economic trends, and cryptocurrency markets. Follow him on X @BRaoMoneyOye for expert insights.
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