Trump’s proposed overtime tax exemption could skew labor decisions and add trillions to deficits
Former President Donald Trump has introduced a proposal to exempt overtime pay from income taxes and payroll taxes, aiming to cut the tax burden for workers putting in extra hours. However, this proposal, along with other tax cuts like those for tipped income and Social Security benefits, could increase federal deficits by as much as $4 trillion, according to estimates. Critics argue the exemption could complicate the tax code and skew workers’ decisions on whether to take overtime shifts.
Economists warn that this policy would add administrative costs and distort labor market neutrality by making overtime more financially appealing, potentially harming long-term economic efficiency.
Harris’s capital gains tax proposal would impose the highest rates in decades
Vice President Kamala Harris’s 2024 tax plan would hike the long-term capital gains tax to 33% for high earners, bringing the combined state and federal rate to 38.3%, among the highest in the OECD. This increase comes at a time when U.S. savings rates are already low, raising concerns that such a policy could further discourage personal savings and long-term investments.
Historically, capital gains rates have been lower than ordinary income tax rates to promote saving-consumption neutrality. If enacted, this policy would mark a sharp departure from decades of tax policy, potentially creating economic challenges for investors and savers.
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