No Tax on Overtime for All Workers Act
- Sponsor
- Rep. Malliotakis, Nicole [R-NY-11]
- Committees
- Ways and Means Committee (primary)
- Last action
- Sep 18, 2025
Bottom line
The bill aims to reduce the tax burden on certain overtime earnings, potentially increasing take-home pay for eligible workers and reducing federal tax revenue.
What it actually does
This bill amends the Internal Revenue Code of 1986 to allow a deduction for 'qualified overtime compensation.' This includes overtime pay required under the Fair Labor Standards Act of 1938, as well as other compensation paid for work exceeding regular rates for a single employer, provided there's a prior agreement. Specific provisions are included for employees covered by the Railway Labor Act.
Proponents argue
Supporters argue this bill would provide direct financial relief to hardworking Americans who put in extra hours, effectively rewarding their effort by reducing the tax burden on their overtime earnings. They contend it incentivizes work, boosts disposable income, and acknowledges the dedication of those contributing beyond standard workweeks.
Opponents contend
Opponents might contend that this deduction would disproportionately benefit higher-income earners who work more overtime, leading to a significant reduction in federal tax revenue without a clear offset. They may also argue it adds complexity to the tax code and could create unintended incentives or disparities in compensation structures.
The bill text is very short and clearly written, making it highly accessible for a quick and thorough review by any interested reader.
Section 2(a)
Deduction for Qualified Overtime Compensation
This provision amends Section 225(c)(1) of the Internal Revenue Code of 1986 to define 'qualified overtime compensation.' It includes two main categories: (A) any overtime compensation required under section 7 of the Fair Labor Standards Act of 1938 (FLSA) that exceeds the regular rate, and (B) any compensation paid for work in excess of the regular rate for a single employer, provided there's a prior agreement between the employee (or labor organization) and employer. For category (B), the agreement must specify a standard work period of not less than 40 hours for a 7-day work period, or, for employees covered by the Railway Labor Act, compensation for work beyond scheduled or maximum hours as determined by agreement.
Supporters argue
Supporters argue this provision directly benefits workers by allowing them to retain more of their income earned from working extra hours, thereby rewarding productivity and alleviating financial pressures. They contend it provides a tangible incentive for individuals to work overtime and contributes to their economic well-being.
Critics contend
Critics might argue that this provision creates a new tax expenditure that would primarily benefit those who already earn more through overtime, potentially exacerbating income inequality. They also contend it could lead to a significant loss of federal revenue that would need to be offset elsewhere or contribute to the national debt.
Tradeoffs
The bill navigates the tension between providing tax relief to a broad category of workers and the potential for reduced federal revenue. It also balances the desire to simplify the tax burden on overtime against the complexity introduced by defining 'qualified overtime compensation' with specific conditions and references to other labor laws.