Trump's Overtime Tax Scam
Ditching tax on overtime sounds great...until you focus...
A couple weeks ago, Trump told an Arizona crowd that if elected president he would eliminate all taxes on overtime pay. The crowd went wild, which is what Trump intended, and then he moved onto another subject. Since then, Trump has repeated his pledge but has offered exactly no specifics on his promise, how it can be accomplished, and how eliminating billions in revenue will impact the country. So, let’s look at Trump’s pledge, as it is a very good example of the non-seriousness of the man and Trumponomics.
Currently, if you are an hourly wage earner and you work more than 8 hours a day and/or 40 hours a week, you are entitled overtime pay, which is “time-and-a-half.” Say you make $20 an hour and you put in 50 hours for the week. Come payday, the boss pays you $800 for the 40 hours regular time and $300 for the 10 overtime hours.
Wage earners are the only workers entitled to overtime pay. If you are a non-exempt salary worker contracted to work 40 hours and your working hours exceed the 40, you get time-and-a-half for whatever time you put in over your 40. Many union jobs are non-exempt salary positions.
There are three other categories of workers pertinent to our conversation. They are exempt salary workers, gig or contract workers, and self-employed workers such as those who own their own businesses. None of these workers are entitled to overtime pay. You put in more than your 8 and 40, and you get paid for what you are contracted to get paid or what you take in.
Now, if you hold a job, I am pretty certain what I just wrote is not new to you. If you are a wage earner or non-exempt and routinely work overtime, Trump’s pledge sounds pretty good. Of course, it does, we all like extra money in our pay checks…but at what cost? Because there will be a lot of costs.
The most obvious cost of eliminating overtime pay is tax revenue no longer available to the government. Because Trump is floating a concept of a plan and refuses to go into any detail about his concept it’s difficult to know how much the government will be missing out on. Still, economists have taken a whack at it. The Tax Foundation, a think tank that supports cutting taxes, estimates that the government would lose $227 billion over ten years. Others peg the loss much higher.
“Big deal. We give the government too much money anyway.” Yes and no. Contrary to popular opinion, the average American does not pay a lot of income tax, especially not compared to citizens in European, Asian, and other countries. What we do pay a lot of are sales taxes, use fees, and other regressive taxes. It’s those flat taxes where we get nickeled and dimed. Small business owners take an extra hit because they are responsible for Medicare and Social Security payments.
Additionally, unlike the rich, most of us can’t afford the kind of tax attorneys and accountants that can help us hide our money and lessen our tax burden. So, yes, we pay more than we should relative to what the wealthiest Americans pony up.
Couple a tax system rigged for the rich with what we get for our money and the sum sucks. We do give the government too much money to spend…on war, bad cops (and the legal settlements that they are responsible for), developer subsidies, cleaning up after corporate polluters, prisons, socialism for rich people like Elon Musk, etc. We also don’t spend enough on education, pensions, affordable housing, protecting us from climate change, food and safety inspection, affordable health care, public parks, and dozens of other things very few people object to. So, it’s not a matter of the government having too much money to spend as much as it’s that government spending priorities don’t benefit us as they should. If the government diverted half of what it spends on war or all of what it gives Elon Musk to play rocketman to health care I don’t think many of us would complain about tax money being wasted.
But with Trump’s overtime tax pledge, we aren’t talking about diverting $227+ billion from war to things that help all of us. We are talking about disappearing billions and having nothing to replace it (forget tariff money). That kind of hit means that the government will have to cut spending, which means eliminating programs. You tell me what gets cut: Will it be war spending, developer subsidies, cleaning up after corporations, prisons, socialism for Elon Musk and Co., etc.? Or will it be affordable housing programs, road maintenance, AIDS awareness, climate change mitigation, food and safety inspectors, national parks, and such? So, yes, in theory, fuck the $227 bil. In practice, everyday people will be screwed hard. I know this, you know this, because cutting people stuff and enforcing austerity for all but the rich is what we’ve been doing for 40+ years.
That’s the government’s end. Let’s talk about the impact on businesses. Businesses like to use wage workers because it gives them flexibility, not only in scheduling people to meet demand. Keeping wage workers mostly part-time allows businesses to avoid obligations like offering health care, providing sick days and vacation pay, and paying more into Social Security. Employing part-time wage workers can also lower the workman’s comp insurance bill. Even when a business has to pay overtime, they still can save money employing wage workers.
As much as a pain in the ass as it is to do payroll, all of the above has been figured out and pretty much runs smoothly for business owners. But what happens if overtime pay isn’t taxed? Employers have to rejigger their system so that they can report to the IRS and state how much each employee is getting in regular pay and for overtime. That doesn’t sound like much, unless you are a business owner and then your reaction is, “Jesus Christ, if it isn’t one thing it’s another and another and another.”
It’s that reaction gets the bosses thinking about alternatives like making full-time wage workers exempt salary employees and working them more than 40 hours a week but without overtime pay. Or they switch everything up so that some if not most employees are now gig or contract workers, who not only don’t get overtime but have absolutely no benefits that come with regular employment (workman’s comp, sick days, vacation, etc.). They don’t schedule people for more than 8 and 40 or make everyone part-time so that they don’t have to deal with overtime at all.
The bosses’ reaction isn’t dictated by law but by practice. This is how bosses generally work, even the fair ones, for if the business doesn’t survive, the workers don’t have jobs. Fair boss or ogre, you do what you have to do to keep the business viable. Again, the dance to survive at the expense of labor is something we’ve experienced for decades.
The only people who are sure to benefit from un-taxed overtime pay are non-exempt salary workers, basically those in a union. And what union members will benefit the most? Cops, firefighters, and a handful of other government employees – but mostly cops, who put in a ton of overtime and are exactly the people Trump is pitching his promise to. Its cops, not unionized city park workers or social service employees, that are going to vote MAGA.
So, unless Trump’s concept of a plan for eliminating taxes on overtime pay has something built in to prevent employers from reclassifying workers, unless he has real money to replace the $227+ billion he wants to shitcan, Trump’s pledge is a dangerous stunt that will fuck many more of us in a ton of different ways than it will help. And the kicker, eliminating taxes on overtime doesn’t even help the rich (making it low on the priority of promises to fill).
Next up: Tariffs, because that missing $227+ billion will not be covered by money coming in from tariffs, tariffs that are certain to screw us all.
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