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 applies to overtime pay required by the Fair Labor Standards Act (FLSA) or compensation exceeding the regular rate, provided it's at least one and a half times the regular rate and mandated by a collective bargaining agreement or employer-employee agreement. The effective date for this amendment is for taxable years beginning after December 31, 2024.
Expected Effects
If enacted, this bill would reduce the tax burden on individuals receiving overtime pay, potentially increasing their disposable income. It could also incentivize employers to offer overtime work rather than hiring additional employees. The deduction aims to provide financial relief to workers who work beyond standard hours.
Potential Benefits
- Increased disposable income for workers receiving overtime pay.
- Potential incentive for employers to offer overtime work.
- Simplification of tax calculations for overtime compensation.
- Encourages and rewards hard work.
- May improve employee morale due to reduced tax burden on overtime earnings.
Potential Disadvantages
- Potential reduction in government tax revenue.
- Possible complexity in defining and tracking qualified overtime compensation.
- May disproportionately benefit higher-income earners who receive more overtime.
- Could incentivize employers to rely on overtime rather than hiring new employees, potentially limiting job growth.
- The deduction may not significantly impact lower-income workers if their tax liability is already low.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the general welfare clause of the Constitution (Preamble) by aiming 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, implying the authority to create deductions and exemptions within the tax code. 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).