WASHINGTON — U.S. Sen. Tommy Tuberville, R-Ala., joined fellow Republican lawmakers to introduce legislation to enact President Donald Trump’s vision of cutting taxes on overtime.
The Overtime Wages Tax Relief Act would create a tax deduction for overtime wages for up to $10,000 for individuals and $20,000 for married couples. The Republican-backed legislation would help Trump achieve some of his promises to cut taxes.
Tuberville joined Sen. Roger Marshall, R-KS, and other GOP senators for a press conference Tuesday to tout the bill.
“Now it’s time for us to help President Trump on his promise to cut taxes for the people he really represents, and that’s hardworking Americans,” Tuberville said.
The proposed deduction would phase out when an individual’s income reaches $100,000 or $200,000 for married couples. It would be reduced by $50 for every $1,000 in income above the threshold. Overtime pay is defined in the bill as 1.5 times a worker’s regular pay rate under the Fair Labor Standards Act.
Tuberville said the bill would “give relief” to Americans, such as nurses or those who work in factories.
“It sends a message to the country that hard work matters,” Tuberville said.
Marshall, the bill’s sponsor, said the legislation could be included in Trump’s “big, beautiful bill,” which is aimed at extending tax cuts and slashing spending. Other proposals that Trump has pushed for, such as no tax on tips, could also be included in the final reconciliation package.
About 8% of hourly workers and 4% of salaried workers earn overtime, according to Yale Budget Lab.
The Tax Foundation estimates that exempting overtime wages could cost the federal government between $680 billion and $1.5 trillion over the next 10 years.
“I look at this one big, beautiful bill and think we need to come up with $2 trillion in savings for American taxpayers,” Marshall said. “And I think if there’s an opportunity to take some of those savings and reward hard-working men and women, then we should do that and much like the Trump tax cuts, I really think this will accelerate the economy and add to the GDP.”
Tuberville highlighted how Alabama was the first state to pass an overtime exemption act. He said he was “hopeful that the federal government will do the same.”
Alabama’s overtime exemption act is set to expire at the end of June after it was enacted in 2023. The tax cut is expected to cost the state about $345 million after officials originally estimated it would cost $34 million. State lawmakers opted not to extend it this year, instead passing more wide-reaching cuts, such as a reduction in the state sales tax on most groceries and other tax cuts.
Alabama House Minority Leader Anthony Daniels, D-Huntsville, sponsored the overtime exemption act. Daniels said he was hopeful that cutting taxes on overtime could be pursued at the federal level.
“Sen. Tuberville and I don’t agree on much, but this is something that I think is worth working on in a bipartisan manner,” Daniels told Alabama Daily News.
Daniels said he would have preferred the Legislature to extend the exemption this session, instead of pursuing other cuts like the one on groceries. He said exempting overtime wages increases productivity, which increases tax revenue, while the grocery tax cut “is not going to motivate people to buy more groceries.”
Some Republicans in the Legislature have said a tax cut on overtime at the federal level could push the issue at the state level.
“If that were to come about, there would be pressure on us to investigate how and if we should pursue the same methodology,” Sen. Greg Albritton, R-Range, said. He chairs the Senate General Fund budget committee and is on the education budget committee.
State budget leaders have said there wasn’t good data prior to the 2023 legislation on how many people worked overtime and the early predictions of the bill’s cost were just estimates.
While the actual cost was about 10 times more than predictions, Rep. Danny Garrett, R-Trussville, said the expense to the state could be even more if people in the future work more overtime.
“I think it’s a complicated issue,” Garrett told ADN on Thursday about what the state may do if Trump cuts the federal tax. “One thing that would have to be addressed at the federal level and the state level is how to address fraud.
“…And if people really started working overtime, that number could grow exponentially.”
Daniels said he will continue the conversation about the elimination of taxes on overtime in the next session. He said he’s open to placing other guardrails on the exemption, which he said was considered this year when trying to make it permanent. The current exemption applies only to hourly workers.
Alabama Daily News’ Mary Sell contributed to this report.