Republican senators introduced legislation on Tuesday that would create an income tax deduction for overtime wage earners – a bill they say fulfills President Trump’s “no tax on overtime” campaign pledge.
The Overtime Wages Tax Relief Act, introduced by Sens. Roger Marshall (R-Kan.) and Tommy Tuberville (R-Ala.), would allow individuals to deduct up to $10,000 in overtime pay from their tax bill.
Married couples would be able to deduct up to $20,000.
The legislation includes phase-out eligibility based on income. So, once individual adjusted gross income reaches $100,000, or $200,000 for married couples, the deduction is reduced by $50 for every $1,000 in earnings above the threshold.
“This is one of President Trump’s priorities, and it’s one of my priorities as well,” Marshall said at a press conference unveiling the legislation. “You know what this would mean to a family?”
“Potentially, for a person that’s working overtime, they could save another $4,000 on taxes if this legislation is signed into law by the president.”
Coupled with savings from extending the Trump tax cuts, Marshall described his plan as a “$6,000 opportunity for hard-working folks back home.”
“If you’re making $80, 90, or 100,000 a year back home, $6,000 is nothing to sneeze at,” Marshall added. “That will go a long way in taking care of Joe Biden’s inflation.”
Tuberville noted that Trump “campaigned and won on a promise to cut taxes for millions of Americans working overtime — and we are delivering on that promise.”
“Thousands of Alabamians put in way more than 40 hours a week in order to save for retirement, put their kids through college, and keep the trains running,” the Alabama senator said in a statement. “They should not be punished with higher taxes for working longer hours.”
The legislation is also backed by the International Brotherhood of Teamsters.
“Thanks to the leadership of Sen. Marshall and a commitment by President Trump to put American workers first, the Teamsters Union proudly supports the Overtime Wages Tax Relief Act,” Teamsters General President Sean O’Brien said in a statement.
“More working people need more money in their pockets — that must be a shared priority across our nation,” he added. “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.”
The proposal is a candidate for inclusion in the GOP’s “one big, beautiful” bill that working its way through Congress, according to the Wall Street Journal.
It’s unclear what the cost of the overtime tax deduction bill would be.
Estimates on the cost of completely exempting overtime pay from taxes ranged from $680 billion and $1.5 trillion over a decade, according to the nonpartisan Tax Foundation.
“We should never look at any issue just in a silo,” Marshall said when asked how the legislation would be paid for. “I look at this one, big, beautiful bill, and think that we need to come up with $2 trillion in savings for American taxpayers. And then I think if there’s an opportunity to take some of those savings and reward hard-working men and women, then we should do that.”
“And much like the Trump tax cuts, I really think that this will accelerate the economy and add to the GDP.”
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