H.R.3118 - No Tax on Overtime Act (119th Congress)
Summary
H.R.3118, the "No Tax on Overtime Act," proposes an amendment to the Internal Revenue Code of 1986, allowing a deduction for qualified overtime compensation. This deduction is subject to limitations, including a cap on deductible hours and a phaseout based on modified adjusted gross income. The bill also mandates the inclusion of overtime compensation on W-2 forms and addresses errors related to Social Security numbers in claiming the deduction.
Expected Effects
The bill aims to reduce the tax burden on individuals who work overtime, potentially increasing their disposable income. This could incentivize workers to take on more overtime hours, impacting both individual earnings and employer labor costs. The changes to W-2 reporting and error handling would also affect administrative processes for businesses and the IRS.
Potential Benefits
- Increased disposable income: Workers who qualify for the deduction would have more money available.
- Incentive to work overtime: The tax break could encourage individuals to work additional hours.
- Simplified tax filing: The bill aims to clarify overtime compensation reporting.
- Potential economic stimulus: Increased disposable income could lead to higher consumer spending.
- Fairness: May be seen as fairer to those who work long hours.
Potential Disadvantages
- Complexity: The phaseout based on modified adjusted gross income adds complexity to the tax code.
- Limited benefit: The deduction is capped at 300 hours and phases out for higher-income earners.
- Administrative burden: Businesses will need to modify W-2 forms to include overtime compensation.
- Potential revenue loss: The deduction could reduce government tax revenue.
- Potential for abuse: Although the bill includes measures to prevent fraud, the deduction could be subject to abuse.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the general welfare clause of the Constitution (Preamble), as it aims to improve the financial well-being of some citizens. The power to tax and spend for the general welfare is granted to Congress under Article I, Section 8. However, the specific details of the tax deduction are policy choices that are within the purview of Congress's legislative authority.
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).