Trump’s Proposal to End Taxes on Overtime Pay Could Cost Billions

Former President Donald J. Trump is calling for exempting overtime pay from taxes, the latest in a string of vague tax proposals that have befuddled tax experts, worried fiscal hawks and seemingly charmed voters.

Mr. Trump floated the idea this past week during a campaign rally in Tucson, Ariz., telling the crowd that it would supercharge incentives to work more and put money back in the pockets of many Americans.

“It’s time for the working man and woman to finally catch a break, and that’s what we’re doing because this is a good one,” he said.

The pitch is part of what has become Mr. Trump’s playbook during the presidential race: tossing out potentially huge tax cuts, defined in just a few words, to try and win over middle- and working-class voters. He has also vowed to exempt tips from taxes and end taxes on Social Security benefits, two ideas that have proven popular. At the same time, he has said he would further cut the corporate tax rate.

As with his promise to end taxes on tips, though, Mr. Trump left many key details about the overtime plan unaddressed, making it hard to estimate its costs. Among the open questions is whether overtime pay would be exempt from just the income tax or if the exception would also apply to the payroll taxes that fund Social Security and Medicare.

There is also the issue of how many Americans could benefit from Mr. Trump’s idea. More than 34 million Americans worked over 40 hours a week in 2023, according to the Bureau of Labor Statistics, but only a subset of that group are owed time-and-a-half pay for overtime under federal law. The rules are complex, but in general Americans earning a salary of more than $43,888 a year may not be owed overtime, depending on their job. Americans paid by the hour, currently about 55 percent of the work force, are broadly eligible for overtime pay.