Marshall proposes overtime tax bill to reduce the cost of Trump promise by 75%
Senator Roger Marshall (R-KS) is set to introduce a bill aimed at fulfilling a campaign promise made by former President Donald Trump to eliminate taxes on overtime wages. Teh proposed legislation is designed to restrict certain tax benefits for high earners, with a deduction cap of $10,000 for individuals and $20,000 for married couples. Additionally, this deduction would be phased out for individuals earning over $100,000 and couples exceeding $200,000 in adjusted gross income.
The legislation could potentially save many taxpayers at the 22% marginal tax rate up to $4,400 in taxes by allowing them to deduct overtime pay. However, tax experts have raised concerns about the potential behavioral changes, where employees may alter their job roles to qualify for overtime. The financial implications of the proposal suggest it might lead to significant revenue losses for the federal government, estimated to be between $227 billion and $1.3 trillion over ten years, depending on employee and employer behavior.
Marshall’s initiative is part of broader Republican efforts to incorporate some of trump’s tax promises into legislation extending the 2017 Tax Cuts and jobs Act, which is nearing expiration. The proposal also aligns with Trump’s additional commitments to eliminate taxes on tips and Social Security.
Roger Marshall to introduce ‘no tax on overtime’ bill estimated to reduce cost of Trump campaign promise by 75%
Sen. Roger Marshall (R-KS) is proposing legislation to enact President Donald Trump’s campaign promise to end the tax on overtime wages.
Marshall’s proposal would deny the new deduction to some top earners and cap it at $10,000 for individuals and $20,000 for married couples, according to the Wall Street Journal. The break for overtime pay would additionally be phased out once an individual’s adjusted gross income surpasses $100,000 or when a married couple’s income reaches $200,000.
This would apply to many taxpayers at the 22% marginal tax rate. They would see a deduction of $20,000 in overtime pay, which would save them up to $4,400 in taxes.
Tax experts had warned about the implications of enacting no taxes on overtime. Erica York, an economist at the Tax Foundation, previously told the Washington Examiner that some people who are not currently eligible to receive overtime could shift their job to qualify.
“They would have a strong incentive to switch to being paid hourly in a way that would maybe not even change their total income, but would qualify them for this exemption,” York said. “You could structure your hours such that your compensation would remain the same, but some of it, by working more than 40 hours a week, would not be taxed.”
According to the Wall Street Journal, Marshall does not have a revenue estimate for his proposal. Estimates from the Tax Foundation in September found the federal government would lose $227 billion over 10 years. This figure is on the lower end of estimates because it does not account for behavior change from employees and employers.
Estimates from other think tanks range from $680 billion to $1.3 trillion over a decade. Under the limits of Marshall’s proposal, notably the part that excludes high-earners from partaking in this, the possible cost of Trump’s proposal could be reduced by about 75%, according to the Yale Budget Lab.
Marshall is introducing the bill with Sens. Tommy Tuberville (R-AL), Pete Ricketts (R-NE), and Jim Justice (R-WV).
TRUMP’S ‘NO TAXES ON OVERTIME’ PROPOSAL: WHAT TO KNOW
The proposal could be included in Republicans’ “big, beautiful bill” they are working to approve to extend the 2017 Tax Cuts and Jobs Act, which expires this year. Republicans who control both chambers of Congress are trying to include some of Trump’s campaign promises on taxes.
In addition to no tax on overtime, Trump promised “no tax on tips” and “no tax on Social Security.” Sen. Ted Cruz (R-TX) and Rep. Vern Buchanan (R-FL) introduced legislation to give a tax break to tipped employees.
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