I have an idea that could supplement your idea of no tax on overtime. I, like many others, am working myself to death to keep my family’s financial head above water with the high cost of living, but I’m also doing it on salary, so I am exempt from overtime pay.
Instead, at the end of the year, I get an annual bonus, the amount of which is dictated by my performance. I then get to watch over 40% of that bonus I worked so hard for VANISH in taxes because they are withheld differently than standard pay.
What if ALL supplemental income, which would include bonuses normally seen in the middle class, such as $120K or less just for example (bear in mind, in the East Bay Area of California $95K/year is the POVERTY level for a family of four) were to be taxed at a reduced rate from normal pay up to a a pre-determined cap to make sure it is to the benefit of the middle class? This would negate the need for a higher withholdings table for supplemental income, and allow us to benefit from the money we earned going above and beyond for the company by working 80 hours a week, instead of just handing it all over to the IRS with the hopes of getting it back next year!
This would also allow us to use more of that money to climb out of our crushing loan interest and/or credit card debt that has been racked up in the last 3.5 years from trying to survive with record inflation, while simultaneously lowering the payroll tax burden on employers who grant bonuses.
I would not however, eliminate the tax on bonuses completely. I believe that would just incentivize businesses to offer less salary in lieu of a higher bonus, and I need regular livable wage EVERY month, not just December.