No Tax on Overtime for All Workers Act
Summary
The "No Tax on Overtime for All Workers Act" proposes an amendment to the Internal Revenue Code of 1986, allowing a deduction for certain overtime compensation. This deduction would apply to overtime pay as required by the Fair Labor Standards Act (FLSA) or overtime paid under agreements between employers and employees (or labor organizations). The amendment aims to reduce the tax burden on overtime earnings, potentially benefiting workers who work beyond standard hours.
Expected Effects
If enacted, this bill would reduce the amount of taxable income for individuals who receive overtime pay. This could lead to increased take-home pay for affected workers. The change would apply to taxable years beginning after December 31, 2024.
Potential Benefits
- Increased take-home pay for workers earning overtime.
- Potential incentive for workers to take on overtime hours.
- Simplified tax calculations for overtime compensation.
- Could stimulate economic activity through increased consumer spending.
- May improve worker morale due to reduced tax burden on extra earnings.
Potential Disadvantages
- Potential reduction in federal tax revenue.
- Increased complexity in tax code due to new deduction.
- Possible need for updated IRS guidelines and forms.
- Benefits may disproportionately favor higher-income earners who work more overtime.
- Risk of employers reclassifying regular pay as overtime to maximize tax benefits.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the general welfare clause of the Constitution, as it aims to improve the financial well-being of workers. Article I, Section 8 grants Congress the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States. This bill falls under Congress's power to modify the tax code.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).