A proposal could eliminate federal taxes on overtime wages in a big blow to help working Americans with their take home pay The initiative aims to help employees retain a greater portion of their income free from extra taxation.
More Support for Overtime Tax Exemption
A bill to force refunds or credits to Americans for overpayments that monthly bills exceed has been reintroduced to Congress — the Keep Every Extra Penny Act (KEEP Act). By passing this bill, which would not tax federal income on overtime wages, millions of workers relying on extra hours to spend less on utilities, fuel, and food would be a welcome reprieve.
Supporters of the bill say there is no reason to tax overtime pay because it will encourage productivity and reward workers who are willing to work past a full week’s hours. They argue this policy will improve household income, lower income stress and strengthen economic growth.
Controversy and a Debate in Congress
Due to growing public and political support, the ṫproposal faces hurdles in Congress. Lawmakers are debating whether the tax exemption has in turn cost the government money, such as in the federal budget and lost federal revenue. Other critics say the policy helps workers, but at a cost — it could call for raises in other areas of tax policy to help balance government-spending and revenue gaps.
How It Might Affect Workers and the Economy
If it’s approved, this change could greatly enhance the financial well-being of millions — and in turn, the economy. The biggest winners: Employees working overtime in fields like healthcare, manufacturing, retail, and transportation. By allowing workers to keep more of their wages, the policy could also spur greater consumer spending, and a boost for businesses and the economy.
What’s Next?
Overtime pay could be tax-exempt but lawmakers are still debating the issue in which the coming weeks will be critical. If it passes, this could represent a historic shift in tax policy, easing the burden of taxation on workers and encouraging workers to invest more hours of labor into this or any other industry.
Check back here for updates as the debate progresses.
