Payam Javan: Former President Donald Trump has announced a plan to eliminate taxes on overtime wages if he is re-elected. Speaking at a campaign rally in Tucson, Arizona on September 12, Trump argued that such a move would provide working-class Americans with a significant financial break and encourage more people to join the workforce. He emphasized that removing taxes on overtime could lead to a “whole new workforce” and would benefit both workers and companies by making overtime more attractive.

Trump also reiterated his commitment to end taxes on tipped wages and Social Security benefits. Under current tax laws, overtime income is taxed similarly to regular income, and any changes would require Congressional approval. Currently, Social Security benefits are subject to federal taxes for many recipients based on their total income, and tips are treated as standard income. Trump’s proposal aims to relieve tax burdens on these sources of income, which he believes will support hardworking Americans.

Vice President Kamala Harris, the Democratic presidential nominee, has also proposed eliminating taxes on tips and Social Security benefits. However, recent analyses suggest that Harris’s tax policies would lead to substantial revenue increases but potentially worsen economic challenges, including the national debt. Trump’s proposed tax cuts, while aiming to reduce income tax distortions, are projected to decrease federal revenue significantly and could introduce new economic distortions, potentially shrinking the economy and increasing the debt.