S.1606 - Overtime Wages Tax Relief Act (119th Congress)
Summary
The Overtime Wages Tax Relief Act aims to amend the Internal Revenue Code of 1986 by introducing a deduction for certain overtime payments. This deduction is capped at $10,000 for individuals and $20,000 for joint returns, subject to income limitations. The bill also includes provisions for reporting overtime compensation and adjusting withholding procedures to account for the new deduction.
Expected Effects
If enacted, this act would reduce the tax burden on individuals who receive overtime pay, potentially increasing their disposable income. It could also incentivize employers to offer more overtime work. The act would require modifications to tax forms and withholding procedures.
Potential Benefits
- Provides tax relief to individuals earning overtime compensation.
- May incentivize overtime work, potentially increasing earnings for some workers.
- Simplifies tax filing for those claiming the deduction, as it's a direct deduction from income.
- Could stimulate the economy through increased consumer spending due to higher disposable income.
- The deduction is available to non-itemizers, broadening its applicability.
Potential Disadvantages
- The deduction is limited and phased out for higher-income earners, reducing its benefit for some.
- May complicate tax preparation for employers who need to report overtime compensation separately.
- Potential for increased government debt due to reduced tax revenue.
- Could incentivize workers to seek overtime rather than negotiate for higher base pay.
- The income thresholds may not be adjusted for inflation, eroding the value of the deduction over time.
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 certain workers. The power to tax and spend for the general welfare is granted to Congress under Article I, Section 8. The bill does not appear to infringe upon any specific constitutional rights or limitations.
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).