ARIZONA – Republican US presidential candidate Donald Trump said on Sept 12 that he will end all taxes on overtime pay as part of a wider tax cut package, if he is elected in the Nov 5 election.
“As part of our additional tax cuts, we will end all taxes on overtime,” Trump said in remarks at a rally in Tucson, Arizona. “Your overtime hours will be tax-free.”
Trump, who faces Democratic US Vice-President Kamala Harris in what polls show to be a tight race, has previously said he would seek legislation to end the taxation of tips to aid service workers. Ms Harris has made a similar pledge.
A Harris campaign spokesperson said in response to Trump’s proposal on Sept 12: “He is desperate and scrambling and saying whatever it takes to try to trick people into voting for him.”
At a campaign event in September with union workers, Ms Harris accused Trump of “blocking” overtime from millions of workers during his 2017 to 2021 presidency.
In 2019, the Trump administration issued a rule increasing the eligibility of overtime pay to 1.3 million additional US workers, replacing a more generous proposal that had been introduced by former US president Barack Obama, Trump’s Democratic predecessor.
The Trump administration raised the salary level for exemption from overtime pay to US$35,568 (S$46,214) a year, up from the long-standing US$23,660 threshold. Workers’ rights groups criticised the move, saying it covered far fewer workers than the scheme introduced under Mr Obama.
The US Labour Department, under Mr Obama, had proposed raising the threshold to more than US$47,000, which would have made nearly five million more workers eligible for overtime. That rule was later struck down in court.
Overtime pay at these income levels overwhelmingly benefits blue-collar workers, such as fast-food workers, nurses, store assistants and other low-income employees.
“The people who work overtime are among the hardest working citizens in our country and for too long, no one in Washington has been looking out for them,” Trump said on Sept 12.
Under Labour Department rules, eligible workers must be paid at least time-and-a-half for hours worked above 40 hours in a single work week.
As of August, American factory workers in non-supervisory roles put in an average of 3.7 hours of overtime a week, data from the Bureau of Labour Statistics shows.
Not taxing overtime would result in less government revenue, at a time when Trump’s plan to permanently extend the tax cuts he passed as president would expand the US deficit by US$3.5 trillion until 2033, according to the non-partisan Congressional Budget Office. The US budget deficit in the first 11 months of this fiscal year is $1.9 trillion.
It is unclear how much revenue the US government receives from taxes on overtime pay.
Trump’s proposal would be a first for the US federal government.
Alabama in 2024 became the first US state to exclude overtime wages for hourly workers from state taxes as a temporary measure that won legislative support in part to help employers fill jobs in a tight labour market. The exemption is for 18 months only. REUTERS
