General Summary of the Bill

The proposed legislation, titled the "Keep Every Extra Penny Act of 2025," seeks to amend the Internal Revenue Code of 1986 by excluding overtime compensation from a person's gross income for tax purposes. This means that the extra earnings an individual receives for working overtime would not be subject to federal income tax, potentially increasing the take-home pay of workers who frequently clock extra hours. The bill provides the exclusion based on requirements set forth in section 7 of the Fair Labor Standards Act of 1938.

Summary of Significant Issues

The bill presents several notable issues. Firstly, it does not clearly define what constitutes "overtime compensation." Without clear guidelines, it might be challenging for taxpayers and the IRS to determine which overtime payments qualify for tax exclusion. Secondly, the legislation does not address the potential fiscal impact on the federal budget. The exclusion of overtime pay from taxation could lead to significant revenue loss for the government, affecting funding for public services and programs.

Additionally, there is an absence of discussion on how this tax exclusion would affect taxpayers across different income levels. This raises concerns about fairness, as the benefits of such a measure may not be distributed equally. Furthermore, the interaction between this new exclusion and other existing tax deductions or exclusions remains unspecified, which may complicate tax filings.

Impact on the Public Broadly

If implemented, this bill could generally benefit individuals who work overtime by increasing their net income, allowing them to keep more of their earnings. This might be particularly beneficial for lower-wage workers who rely on overtime to make ends meet. However, broader fiscal implications could arise from a reduction in federal tax revenue. Decreased funding could impact public services such as education, healthcare, and infrastructure, affecting the general population.

Impact on Specific Stakeholders

For workers, especially those in industries where overtime is common, the impact would likely be positive, providing them with more disposable income. This could lead to increased consumer spending, potentially boosting local economies. However, for the government, the loss in tax revenue may necessitate budget adjustments, potentially impacting the funding of public programs and services.

Employers might also experience indirect effects. While employees might appreciate the increased net income, employers could face additional administrative challenges as they navigate the implications of this tax change. Financial advisors, tax preparers, and the IRS would likely need to adapt to new regulations, requiring potential training and adjustments in processes.

In conclusion, while the "Keep Every Extra Penny Act of 2025" aims to provide financial relief to workers by exempting overtime pay from taxation, it raises significant questions about its economic and social implications. A more detailed and clarified approach would be necessary to ensure equitable benefits and address the challenges highlighted by this proposal.