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"A working class hero is something to be / If you want to be a hero well just follow me"
Trump made an interesting proposal recently to end taxes on overtime wages. I think this proposal is a non-starter for practical reasons, but is still directionally correct. Ending taxes on overtime wages is intended to help the working class. And the working class in America are not being given a fair shake. Our society feels as if it is run for the benefit of retirees and people with fake email jobs. We need to take action to rectify this.
Despite what some people may say, blue collar work is awful. It pays little, it's hard on your body, it's often hourly (so no pay when you take off to go to the dentist), the benefits are typically bad, etc.. While some people can get rich by operating a business providing blue collar services, this is an extremely hard and frustrating path. Is it any wonder that young people only want white collar jobs?
The Democratic Party solution for this is of course more welfare for the working poor. I think this policy is deeply destructive as it disincentives labor, and creates a captive class who are dependent on the government to live. (This might be a feature, not a bug, to some Democrats who envision a permanent ruling majority).
But I think a more constructive way forward is to increase the value of blue collar work. Tariffs help with this, even if they reduce overall prosperity. This overtime proposal is interesting since it only rewards people who are already working more than 40 hours a week. And it will, of course, hit mostly blue collar workers.
And, with that, the party alignment feels complete. Trump is winning among blue collar workers by nearly 20 points, and losing among white collar workers by similar margins. Democrats are promising subsidies for white collar workers such as student loan forgiveness. Trump is promising to reward his own base. Personally, if we're buying votes, I think Trump's proposals are better.
Policies like this always take too static/naive of a world view. You imagine how people currently behave, and This rewards people who are "working" more than 40 hours a week after all of the employers and employees update their behavior to exploit the new system. Instead of offering a 40 hour week at $20 an hour, companies can offer $10 an hour for 40 hours and then with 10 $30/hour "overtime hours" of make-work to make up the difference. Maybe they'll have people be "on call" so it counts as overtime but doesn't actually add work.
And then the salaried people will all want to be "hourly" so they can get two thirds of their pay count as "overtime". Your $80k/yr Secretary and your $300k/yr chief engineer are going to become hourly employees whose total yearly pay just happens to coincidentally always adds up to approximately $80k and $300k respectively, but technically half of it is overtime. A lot of the more highly paid people already work more than 40 hours per week anyway, so it wouldn't be too hard for the business to fudge the values around and count their pay as overtime. And for the people who don't, again I'm sure the business could just make make-work for them to technically count as overtime, while shuffling the numbers around to keep their total pay the same, or even less, since if the employee is paying less taxes their effective pay is higher even at a lower nominal value. And that's why the companies would go through the effort of doing this. Why pay $60k for an employee when you can pay $50k to one who gets to evade taxes via loopholes?
I get the sentiment of wanting to pay blue collar workers more in a way that doesn't enable welfare leeches. But this isn't the way to do it without some serious modifications to fix the incentive structure.
You’re acting like individual income tax avoidance is a bad thing? Just like Trump’s proposed tax incentive on tips, this too would benefit blue-collar and service sector workers. Maybe we should be advocating policies that place a greater proportional tax burden on those who society caters to already: corporations and white-collar PMCs?
This isn’t the first time that politics has created tax incentives for employers based on hours worked, either. Remember that the Affordable Care Act’s large employer mandate kicks in for “full-time” employees who work 30 or more hours per week? Take this with a huge grain of bias, but the Cato Institute in 2023 found that there was a minor effect in reducing FTEs due to the employer mandate.:
There's already a much easier way to do this: Increase marginal rates on higher earners. This comes with the added benefit of actually increasing government revenue and not decreasing it.
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Here in the real world, white-collar PMCs are already shouldering an absolutely massive share of the tax burden. The top 10% make about 50% of the income and pay about 70% of the taxes; the top 25% make about 70% of the income and pay about 85% of the taxes.
Yes, and? It's Federal Income Tax we're talking about here. Including payroll taxes makes it less progressive but the upper 25% is STILL paying the lion's share. State and local taxes are irrelevant.
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