Republican-led bill would give a tax break on overtime pay

A Republican-backed bill to waive state taxes on overtime pay for hourly workers in Delaware has been introduced in Dover, mirroring a measure that President Donald Trump has pushed at the federal level.

While the Delaware bill is unlikely to pass with Gov. Matt Meyer expressing his opposition, it is an indication that the state GOP may be following a more populist playbook than it has in years past.  

The proposal, House Bill 126, which Rep. Bryan Shupe (R-Milford) introduced last month, would exempt state taxes for full-time hourly workers on wages earned on work that exceeded 40 hours in a week. The bill would also apply to full-time wage earners with multiple jobs, as long as their combined hours exceed the 40-hour threshold, Shupe said. 

Shupe said the bill would ease financial pressure on people given recent inflation on expenses, such as gas and groceries.

“[The taxes] won’t be taken out of their biweekly paycheck, and that way they will have more of their own money to spend on the things that meet their needs,” he said.

But Mila Myles, a spokeswoman for Gov. Meyer, said the bill would create disparities between wage earners and salaried employees, “unnecessarily complicating the tax system for employees, employers, and the Division of Revenue, rather than providing meaningful relief to those who need it most.”

“Gov. Meyer believes in ensuring the wealthy pay their fair share, and our administration remains committed to real tax fairness that supports working families and vulnerable communities,” Myles said, referring to the governor’s push to enact new tax brackets on the highest earners.

The measure mirrors a federal proposal championed by President Donald Trump, who has advocated for making overtime pay tax-free as part of his broader tax reform agenda.

Last week, Republican lawmakers in Congress introduced the ‘Overtime Wages Tax Relief Act,’ which would allow individuals to deduct between $10,000 and $20,000 of their overtime earnings from taxable income.

Delaware’s version of the measure is backed by several Republican lawmakers, including State Sens. Eric Buckson, Gerald Hocker, and David Wilson, as well as Reps. Lyndon Yearick and Shannon Morris, who are all listed as additional sponsors.

House Minority Whip Jeff Spiegelman (R-Clayton) says he appreciates the bill’s intent but believes its potential impact on the state budget must be fully considered before moving forward.

“That’s a great concept. At the same time, though, we’re also facing a massive budgetary shortfall in the next couple of years,” he told Spotlight Delaware.

In February, Delaware Office of Management and Budget Director Brian Maxwell said the state could face a nearly $408 million deficit in fiscal year 2028 if spending patterns don’t change in the state, according to a report from Delaware Public Media.

In her comments to Spotlight Delaware, Myles from the governor’s office also cited the impacts that such a tax exemption could have on Delaware’s state budgets.

“This is a money-losing bill,” she said.

Shupe said the Office of the Controller General is working on a fiscal impact analysis for the bill, which will be ready in time for its first hearing during the next House Revenue and Finance Committee meeting. He said he asked the committee to place the bill on its next agenda.

Shupe also asserts that the tax exemption would allow people to spend money saved within their local economy, which could slowly turn into tax revenue for the state.

House Majority Whip Ed Osienski (D-Newark) echoed the concerns of the Governor’s office, highlighting the state’s reliance on personal income tax for revenue – it’s the largest revenue source in the state, bringing in more than $2 billion annually or about a third of the state’s budget. He also says the bill could cause inequities among taxpayers.

Despite his comments, Osienski said he is uncertain whether he will support the bill. It is also unclear whether the rest of Delaware’s Democratic legislative leaders support the proposal.

“I’m sure there’s going to be a lot of questions that are brought up in committee, and I’ll be looking at those minutes to see what some of the answers are,” he said.

Although Shupe does not have the governor’s support, he believes lawmakers on both sides of the aisle will see the proposal as a way for individuals to keep more of their own money without having a large impact on the state budget.

“There is a breaking point, and over 40 hours should be it — any taxes should be in [wage-earners’] pocket and not going to the state of Delaware,” he said.

A date for the next House Revenue and Finance Committee meeting has not yet been scheduled.