Jobs as a host or waiter are more attractive now that Republicans have cut taxes on tips. This will give full-service restaurants a boost in the stiff competition for labor.

In other words, the One Big Beautiful Bill Act will give a marginal boost to restaurants like Chili’s and Bonefish Grill as they work to lure workers who might otherwise take roles at fast-food joints or in retail, and specifically for “front-of-house” workers who collect wages.

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The shift in the restaurant industry landscape is one of the secondary effects of President Donald Trump‘s signature legislation, which fulfills his 2024 presidential campaign promise of “no taxes on tips.”

Under the new law, workers will be able to deduct up to $25,000 in reported tip income and $12,500 in overtime pay from their taxable income when filing their federal tax returns for the next four years. The deduction would phase out once a worker’s income hits $150,000, or $300,000 for couples.

For jobs that entail a significant proportion of income as tips, such as at full-service restaurants, the break could be a major selling point for employers trying to recruit labor.

As a result, industry experts anticipate that workers in non-tipped roles or fast-food establishments could seek jobs where tipping is more common.

“There’s probably going to be a rush of labor, I would say, to the full-service restaurants where tipped income is the primary source of income,” Jeffrey Brecher, office litigation manager at JacksonLewis, told the Washington Examiner.

Restaurants like Chili’s, for example, where servers regularly receive tips, could become more attractive compared to fast-food chains like Chipotle, where tipping is inconsistent or minimal but pay is at or above minimum wage.

This could lead to a talent imbalance between restaurant types.

Brad Alaoui, the COO of Roanoke Hospitality, a restaurant group based in downtown Chicago, said he expects a surge in server applications, which could lead to improved customer service and more experienced hospitality workers.

“Hopefully, you can get better quality servers, and more veteran servers. Maybe people who left the industry might come back now if there’s this new environment,” Alaoui told the Washington Examiner. “It’s definitely an advantage to the workforce, and also gives us an opportunity to pick and choose.”

Alaoui, though, noted a downside of the new policy. He could foresee servers losing some motivation to “work up” and rather remain content serving, making it harder to fill management positions. 

“They might think, ‘I’m going to have a good service position, I’m probably making twice as much as a manager, as much as a VP,’” Alaoui said.

Brecher noted that another complication is that the tax break for tips will create inequities within restaurants. Some states restrict tip-sharing with back-of-the-house workers, such as cooks and dishwashers.

Now, those workers have added financial motivation to move to a role serving food or managing customers.

“Any time you tinker with the tax code, it creates incentives for people to take advantage,” Brecher said.

One major question is whether back-of-the-house workers who receive tips are deemed eligible for the no-taxes-on-tips policy, restaurant consultant Dan Kezner told the Washington Examiner. The One Big Beautiful Bill Act specifies that the new deduction is only available to workers in occupations that have “customarily and regularly received tips,” as determined by the treasury secretary.

Tip-sharing with kitchen workers has become more common in recent years, Kezner said, especially in major liberal cities that have moved to raise minimum wages and eliminate lower minimums for tipped workers. Managers, newly required to pay much higher wages to hosts and servers, have struggled to balance payroll across workers and have looked to tip-sharing to shore up the compensation for kitchen workers.

Maintaining that balance could be made more difficult by the no-taxes-on-tips policy, he said.

Kezner said, though, that the measure, which projects to reduce revenues to the treasury by $31 billion over the next four years, will overall benefit restaurants, especially in light of the industry’s challenges in finding workers in the wake of the COVID-19 pandemic.

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“I do think this may help again drive people back into the business in some way, shape, or form,” Kezner said.