Senators push to exempt overtime pay from taxes
- Senators introduce legislation to allow workers to deduct overtime wages from taxes.
- The bill sets limits on deductions based on income levels, aiming to alleviate financial burdens.
- If passed, the act could significantly increase take-home pay for many American workers.
In the United States, Senators Roger Marshall from Kansas and Tommy Tuberville from Alabama have introduced the Overtime Wages Tax Relief Act, aimed at allowing workers to deduct overtime pay from their income taxes. Their proposal is aligned with President Donald Trump's campaign promises to reduce taxes on overtime wages and tips. The bill defines overtime pay as compensation earned at least 1.5 times the worker's regular rate, a standard defined by the Fair Labor Standards Act. The tax deduction is capped at $10,000 for individuals and $20,000 for married couples filing jointly, phasing out after certain income thresholds. Furthermore, the legislation has garnered support from various labor organizations, emphasizing the benefits of increased take-home pay for workers. For instance, a couple in the 22% tax bracket could potentially save over $4,400 in taxes by deducting $20,000 in overtime pay. Despite the beneficial implications of the tax deduction, it is important to note that taxpayers would still owe taxes on their overall income, which means this initiative would not eliminate tax liability entirely. The announcement has sparked a broader discussion within Congress as additional tax reforms are being considered, including adjustments to the state and local tax deduction (SALT) cap and possible changes to the treatment of electric vehicle credits. Republican leaders are keen to push forward a comprehensive tax reform bill that would likely include this Overtime Wages Tax Relief Act, asserting that it represents a significant aspect of Trump’s pro-worker agenda. Though the bill appears to have momentum, it faces challenges related to differing Republican opinions on tax adjustments, particularly regarding the SALT cap and the potential elimination of the electric vehicle tax credit. As Congress deliberates on these tax reforms, the outcome may significantly impact the economic landscape for American workers, especially those earning overtime wages and utilizing tip-based revenue.