Market Analysis

Republican U.S. presidential candidate Donald Trump announced on Thursday that, if elected in the upcoming Nov. 5 election, he plans to eliminate all taxes on overtime pay as part of a broader tax reduction plan.

"As part of our additional tax cuts, we will end all taxes on overtime," Trump said during a rally in Tucson, Arizona. "Your overtime hours will be tax-free."

Trump, who is competing against Democratic Vice President Kamala Harris in what polls indicate to be a closely contested race, has also previously proposed eliminating taxes on tips to benefit service workers. Harris has put forward a similar pledge.

In response to Trump's latest proposal, a Harris campaign spokesperson stated, "He is desperate and saying whatever he can to trick voters into supporting him."

Earlier this month, Harris accused Trump of hindering access to overtime pay for millions of workers during his presidency from 2017 to 2021.

In 2019, Trump's administration enacted a rule extending overtime eligibility to an additional 1.3 million U.S. workers, though this replaced a more generous proposal introduced by his predecessor, President Barack Obama. Under Trump, the threshold for exemption from overtime pay was raised to $35,568 per year, up from the long-standing $23,660. Workers' rights advocates criticized the change, arguing it affected far fewer workers than Obama's plan.

Obama's Labor Department had initially proposed raising the salary threshold to over $47,000, which would have made nearly 5 million more workers eligible for overtime. However, this rule was eventually blocked by the courts.

Overtime pay primarily benefits blue-collar workers, such as fast-food employees, nurses, and retail workers, all of whom fall into lower income brackets.

"Overtime workers are some of the hardest-working citizens in our country, and for too long, Washington has ignored them," Trump said on Thursday.

Under existing Labor Department regulations, eligible employees must receive at least time-and-a-half pay for any hours worked over 40 in a single week.

As of last month, non-supervisory American factory workers averaged 3.7 hours of overtime per week, according to the Bureau of Labor Statistics.

Eliminating taxes on overtime would reduce federal revenue, coming at a time when Trump's plan to extend his previous tax cuts is projected to increase the U.S. deficit by $3.5 trillion by 2033, according to the nonpartisan Congressional Budget Office. The U.S. budget deficit for the first 11 months of the current fiscal year stands at $1.9 trillion.

The amount of revenue the government currently collects from taxes on overtime pay is unknown.

If implemented, Trump's proposal would mark a first for the federal government. In 2023, Alabama became the first state to temporarily exclude overtime pay for hourly workers from state taxes, a measure intended to address labor shortages. This state exemption is set to last 18 months.

Paraphrasing text from "Reuters" all rights reserved by the original author.