Talk Elections

I ask that you do not take into account whether or not income taxes should exist at all. Assume that the regular 40-hour work week is taxable for local, state, and federal levels of government. Should overtime pay be as well? Why or why not?

Obviously this refers to wage earners. Also, if you vote for the third option, specify which and why.

Yes.. why on earth not?

It would be nice :)

Correct me if I am wrong...

Isn't overtime standards dictated on a state level?

Generally, yes, but not all states have specific laws. There are federal blanket laws. And as far as I know all states tax overtime pay.

I brought this up because there has been talk at work at how irritating it is to work overtime and have so much of it taxed away. It seems unfair.

Yes, but if the company operates in more than one state, then the federal standards apply.


I think the income tax should apply to overtime pay.  I think all hours worked beyond something reasonable like 48 in a week for salary workers should be paid by the hour equal to 1.5 times your regular hourly wage calculated by dividing your weekly salary by 40 hours.  Also, your salary, divided by the number of hours worked in a week should NEVER fall below the federal minimum hourly wage.

I also believe that employees should be able to opt for an hourly wage at any time.  This would keep companies from making salaries an uncompetitive way of paying workers less for more work.

I guess I just believe that people should be able to have their slice of the pie for the hard work they do and not just leave all of the dessert to the investors and higher ups.

I'm more familiar with Canadian tax rates.  But the illustration hold why the previous poster is forgetting about other factors.

Suppose your wages earn you $34,000 a year.  You pay 22% income tax in Ontario, combined federal and provincial.  You decide you really want to be productive and work an extra 5 hours on average, per week, for 40 weeks, at time and a half, so $17(1.5) = $27/hour or so.

($27/hour)(40)(5) = $5,400

Normally, you would lose 22%: $1,188

But, the government rewards you by punishing you by taking 27% instead: $1,458.  The difference is $270, or a full 10 two weeks of overtime as punishment.

And snow, seriously, you and others need to butt out of my bloody life.  If I feel like working 100 hour weeks, but get paid $25,000/year and end up thus with $5/hour, it is my right to do so.  It is NONE OF YOUR BUSINESS.

If regular wages are taxable income I don't see why overtime wages shouldn't be.

If that's how things worked... and it all came down to what the individual wanted, then I would be okay with "butting out of your bloody life."

Unfortunately, that's not how it works.

I can't go to my electric company and say "well, I'm not going to pay this month, but I'm gonna be twice as productive at work next month so I'll pay you for both months next month.  By the way, leave the electricity on."

Exactly.

Um, yes.  Overtime pay is no different than regular pay.  It's all income derived from employment.

Solution ...   (drum roll please) 



Vote for Ron Paul

Unless you're getting a lot of overtime, I can't see how overtime pay would be taxed to any higher degree than regular pay.

The OT pay may knock you into a higher bracket and be taxed at a higher rate.

well, if your normal wage is value x and OT wage is 1.5x, you should only be taxed at rate x.

Yes, which is why I said "unless you're getting a lot of overtime".


If you make 50% more money in the same tax bracket, you get a 50% more taxes deducted... that's the way income tax works.

Have to look into the issue more, but my inclination is to say no.

That has the major downside of drastically complicating the tax code however.

If someone earns $60,000 in a year through his usual wage and another earns $60,000 in a year with $5,000 from overtime pay, what sense does it make to not tax both of them on the $60,000 that they made?

Since recently, overtime pay (pay for work beyond thirty-five hours a week) is non taxable in France. Sarkozy implemented this as part of his plan to allow the French to "work more to earn more."

The logic behind it is that it encourages employers to pay their employees overtime, curbing underemployment. However, it certainly doesn't do anything to solve the unemployment crisis: employers don't feel compelled to hire more people because they can pay a current employee overtime and avoid paying taxes.

Only on the additional dollars of income over the line for the higher bracket...(which I'm sure you knew, not sure others did)

And as to the question.  Yes, absolutely...under the definition of income, overtime is income.

Whether we need to refine our definition of income is a different question.

I applaud everyone who responded along the lines of "If it's income, then income tax laws apply." Well done! Perhaps I should have implied that income tax laws might change for overtime pay. Perhaps I just did.


The difference is in hours worked. One could reason that the person who made that $5000 in overtime pay was working overtime because they need the money more, or that they have put in more effort, or other things.

I'm surprised by the answers so far. I had reasoned that many Republicans and Libertarians would agree that less taxes of any kind is good while the labour/class oriented Democrats (opebo came to mind) would agree that the working class should deserve a break for more hours. Funny how the thread is turning so far.

Hmm, I suppose you could have a point... although one could argue that it's not as if the person isn't getting the extra money; rather, it's just being taxed like any other income.  One could also argue that this could well induce people to work long hours to cash in on as much untaxable income as they can get, which I don't think would be a positive.

Yes, but consider someone who earns a salary instead of a wage, and that person makes the same amount in a year. Let's say the normal wage guy worked 40 hours a week, the overtime guy 42 hours a week, and the salary guy 50 hours a week. Outside of exceptions like not showing up to work, salary workers don't tend to have their hours tracked. Ultimately the system would therefore have to tax the non-overtime wage earner and the salary earner the same. Is it fair to tax the overtime earner less even though someone who earned the same amount as him worked longer hours?

Yes, it should be treated like any other compensation. If they had separate rules for overtime pay, it would only make the tax code more complicated anyway.

Sure, why not.

No

There's an nice economic case for it (overtime work would generally be more at the margin of the labor-leisure tradeoff decision, so reducing taxes on it would encourage higher productivity and eliminate some of the deadweight loss from the income tax, to a much larger degree than a general tax cut), though Dibble raises a few good points about its implementation.

Why would it?  There's already several different kinds of income.

I don't find taxation to be the major problem for the working class - their paucity of income is caused by the low pay allowed them by their betters.

I agree that low pay is the largest plight of the working class, but I don't see why abandoning taxation on overtime would not be a positive move to help them. Disparity in income would not be so great if so much of it were not taxed towards a government that hardly represents them.

If the rich have caps in our tax code which restrict how much of their wealth can be taxed, should the Laborer not have exemptions on how much of his time on the clock earning an honest wage is taxed? 

Overtime pay should not be taxed. 

Here's my compromise proposal: Overtime pay is only taxed at the rate it would be if it was paid out at the normal rate of pay rather than the 150% rate it is now. Example: You work two hours overtime at $10/hour. You'll be paid $30 for the overtime, but would only be taxed for $20 of it.

Edit: Looks like Tweed already proposed this.


That's a good point. Although one could argue a better one for simply removing the caps and loopholes the rich use to limit their taxed income (which I would support anyway overtime pay taxed or not).

Although I obviously advocate no taxes on overtime, this proposal is preferable to the current system.