On July 4, 2025, Donald Trump signed the One Big Beautiful Bill Act into law, ushering in a sweeping revision of the federal tax code. Supporters hail the measure as meaningful relief for working Americans, while critics warn it could add an estimated $3.4 trillion to the federal deficit over the next decade, raising concerns about long-term fiscal stability.

The law permanently extends existing tax cuts and introduces several targeted provisions, including tax-free overtime pay, expanded deductions for seniors, and a major change for service workers: tips are no longer subject to federal income tax. While tips must still be reported, the exemption applies to millions of workers in restaurants, hospitality, and delivery services whose income relies heavily on gratuities.

Backers argue the policy delivers immediate, practical relief to workers living paycheck to paycheck. Lawmakers such as Ted Cruz and Jacky Rosen have said the change allows workers to keep more of what they earn and may ease pressure on small businesses without forcing higher base wages.

Critics caution that exempting tips could distort compensation structures and encourage income volatility, while the broader package of permanent tax cuts may strain future budgets. Even so, many service workers are already reporting higher take-home pay, leaving economists to watch closely whether the law produces lasting economic gains—or deepens long-term fiscal challenges.