President Donald Trump often touted, both on the campaign trail and now in office, the ideas of no taxes on tips and no taxes on overtime. Now, some of his fellow Republicans in the Senate are trying to make that happen.
U.S. Sen. Roger Marshall of Kansas and Sen. Tommy Tuberville of Alabama introduced the Overtime Wages Tax Relief Act. It would allow many American workers to deduct overtime wages on their income tax returns.
Overtime pay is defined in the bill as workers who earn 1.5 times their normal pay rate under the Fair Labor Standards Act, often referred to as “time-and-a-half.”
The bill said individuals would be able to deduct up to $10,000 in overtime wages and married couples filing jointly could deduct $20,000. However, once an individual hits $100,000 in adjusted gross income or a married couple gets $200,000, the deduction would begin to phase out.
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Some state lawmakers, including ones from New York, North Carolina, Connecticut and Delaware, have proposed legislation to to end taxes on overtime pay, according to Kiplinger.
Under the legislation, workers could take the tax break whether they itemize their deductions or take the standard deduction. They would still have to pay taxes on their overall income, though.
What would the deduction be for most Americans?
The Wall Street Journal ran the numbers and found that a couple in the 22% tax bracket, which many Americans find themselves in, who deduct $20,000 in overtime pay on their tax return would save $4,400 in taxes.
Marshall and Tuberville’s measure defined overtime to include jobs as law enforcement officers, nurses, trade workers and factory employees, among others.
Has there been any reaction from organized labor?
Sean O’Brien, the head of the Teamsters Union, said in Marshall’s press release that “more working people need more money in their pockets.”
“That must be a shared priority across our nation,” O’Brien said. “This bill will help make it happen, especially when more workers are electing for more overtime to ensure they can make ends meet. Workers, union and nonunion alike, should not be taxed for their initiative and extra labor.”
Marshall, a member of the Senate Finance Committee, said in a statement that the legislation “ensures Kansans keep more of their hard-earned wages and codifies a key pillar of President Trump’s pro-worker agenda. “
What happens next?
Supporters are hoping to include the Overtime Wages Tax Relief Act in the budget bill that Republicans in Congress are currently working on. Trump has referred to it as “one big, beautiful bill.”
Meanwhile, other Republicans are working on a similar bill regarding the campaign pledge for “no tax on tips.“
