How “No Tax on Overtime” Would Affect the Debt
Bubba
16 Sep
Donald Trump doesn’t appear to be all that worried about how his agenda will affect the deficit. (Tax Foundation)
A new analysis of Trump’s “no tax on overtime” plan: Exempting overtime pay from income tax could reduce tax revenues by $227 billion over 10 years, according to estimates from the Tax Foundation.
If overtime pay were also exempt from payroll taxes, it could result in an additional $145 billion loss over 10 years.
The impact: Trump’s entire tax and tariff package would raise the deficit by $1.6 trillion over a decade, per the Tax Foundation.
The complexity: Trump’s plan would likely require an expansion of the current tax bureaucracy.
In 2023, 34.4 million workers reported working more than 40 hours a week.
Tax Foundation senior policy analyst Garrett Watson:
Exempting overtime is a more complicated proposal than Trump’s other proposed exemptions for tips and Social Security, which are both already subject to some tax reporting requirements. Instead, exempting a portion of wage income, based on hours worked, introduces an entirely new distinction in the tax code, requiring additional information reporting of hours, likely from employers and employees, as well as new administrative checks.
In short, exempting overtime would unnecessarily complicate the tax code, increase compliance and administrative costs, and reduce neutrality by favoring certain work arrangements over others.
Bubba’s Two Cents
Trump is in some ways a fusion of the old and new GOP outlook on economics. He has what seems like a genuine gut-level disdain for burdensome regulations and waste. His fervor for cutting taxes is well in line with traditional fiscal conservatism. But there are also heavily populist tones to his agenda, such as his emphasis on tariffs and policies directly aimed at benefitting low-wage workers. Lastly, Trumponomics doesn’t seem overly concerned with debts or deficits.