I almost laughed out loud when I read the proposal floated by Virginia Beach delegate John Welch in this morning’s Virginian-Pilot.
Welch announced that he wants to stop taxing the overtime Virginians work. Welch, running against Democrat Bobby Mathieson, said the move would be an incentive to work overtime for people at small businesses. It also would let workers keep more money, he added.
Is this like former governor Jim Gilmore’s “no car tax” plan? We saw how well that worked out. In this case, Welch is talking about eliminating state income taxes on overtime wages. A few things came to mind here:
- Is he talking about all overtime or just the extra compensation? Overtime is paid at the rate of 1 1/2 or 2 times the base wage, depending on certain circumstances. So for a $10 per hour worker, overtime would make the pay $15 or $20. By saying “overtime pay,” does he mean the extra $5 or $10 or the whole $15 or $20?
- Implementation of this by any business, but especially small businesses, would be a nightmare. Believe it or not, a lot of small businesses still do payroll by hand. And for those who rely on computer software, how long would it take for the software to catch up? Not to mention the cost to the payroll companies to reprogram.
- Given the changes in the definition of employees who are exempt from overtime pay, expect companies to become even more aggressive on who is eligible versus who is not in order to avoid the extra work.
- How will this be handled on the W-2 forms? Will there be a special designation of the amount of overtime paid? Where will it be reported?
The Department of Taxation conservatively estimates that this plan will cost $433 million. Now, tell me, when Virginia is facing a $641 million budget deficit, where’s the money going to come from?
This “no overtime plan” is a no go.
VIVIAN J. PAIGE | All Politics is Local 
There are several points here that need to be addressed.
1) Not all overtime work is compensated at higher rates. The overtime compensation of “exempt” is not, if it is compensated at all. I have worked 109 hours in the last fortnight — I will only be paid for 80. It is only the non-exempt employees, the blue-collar, who will benefit.
2) Those who do payroll by hand will have a problem, but since they have to compute the time-and-a-half hours separately anyway, it should not be that great of a burden. Computer software changes every year to account for new deduction rates as the tax brackets change.
3) The companies do not decide who is exempt and who is not. That is a matter of law.
4) Since the overtime wages would not be taxable, why does it need to appear on the W-2 at all?
5) WHOM will it cost $433 million? The workers’ earnings are THEIRS, not the government’s. Let’s rephrase your statement: “This plan will save the workers $433 million.”
Overtime that is not paid is not overtime, AEM. That’s a silly argument. And it is not just blue collar workers.
If you have never done payroll by hand, you have no idea. And the complexity of this particular change means that the software companies will have to know the point I made at the beginning, ie, whether it is just the extra pay or the whole thing. That is quite different from the other deductions.
Companies do indeed interpret the law on who is exempt and who is not. Perhaps you are unaware of the great conversation that took place in 2004 when the new overtime rules were about to go into effect. There has always been an argument over who is exempt from OT rules and who is not. The law isn’t that clear.
I assume you have never prepared a W-2. The information would have to appear – just like retirement plan contributions, for example – to explain the differences between the gross wages for federal tax purposes and the gross wages for state purposes.
You have assumed that all of the $433 million is the result of income taxes. Have you considered the cost to the state for the administration of this, changing computers, etc?
One other point that just occurred to me: if the wages are not taxable for state income tax purposes, what about state unemployment? It follows that those wages would NOT be subject to unemployment, either. Will that mean lower benefits for the workers because their wages are lower?
that’s good, Vivian. Oppose a tax cut for workers because of what you think it might do to unemployed people.
Smart!
You know, I like the Car Tax cut. I just wish it had been fully implemented.
Brian K – you only picked out one of the 5 reasons, and the one that was an afterthought. Care to talk about the others?
Brian – the car tax removal was just too costly. That’s why the GA never fully implemented and why, in 2005, they capped the reimbursement to the localities for it.
I’m happy being in favor of hard work, incentives, and people keeping more of what they earn.
I’m also happy with you looking out for the government first. “Where’s the money gonna come from”…as if it’s the government’s money.
First of all Anon needs a union! I feel sorry for him working all those hours and not getting paid. Get a non-exempt job. You know the kind where you actually construct something in life, get a little dirty, and work in hard tough conditions.
Brian, the reason my property taxes went up was because you voted for Gilmore and the stupid tax cut plan on cars. Take away the biggest revenue source in the state and the cities were forced to go elsewhere and where did they go, straight to real estate taxes. Boy, I am getting so tired of being right. told the voters that day when Gilmore was elected their taxes would go up and they did under Gilmore. I could easily get rid of a car, try getting rid of a house. That was such an easy vision of the road ahead.
You need to get a real blue collar job also. Us blue collar guys live in the real world!!
Go ahead and launch a campaign to bring back the car tax. Let me know how far you get.
Kerwin is probably right — that plan was SO successful that it shot Jim Gilmore’s presidential campaign ahead of all the other R’s. It worked so well for this state that he’s a shoo-in for Senate. It worked SO well that the state was drowning in red ink until Mark Warner and others stepped up and made the hard decisions instead of cheap, sloppy campaign promises like Gilmore and the R’s.
Brian always holds his nose when talking about government but it never sinks into his thick head THE PEOPLE are the government — not Brian Kirwin or Jim Gilmore or that drooling idiot John Welch. In fact, Brian hasn’t even caught on yet that most Republicans have quit running “against” the government in this day and time.
He seems genuinely puzzled that someone would ask: “Where is the money going to come from?” Maybe if Republicans would ask that question more often, the Feds wouldn’t be swimming in red ink and Va wouldn’t have taken it in the gut like we did when Governor Goober (Gilmore) was screwing everyone with the car tax.
Brian, Welch and Republicans are laughable how they screw everyone except the elite, and they pose as “looking out for the working guy” and “helping them keep more of their money.”
What frauds. I think the fact that Dubya and Gilmore have become such laughingstocks (with Welch rushing to join them) is testimony as to how decrepit and outdated the R’s idea of “campaign slogans as governing philosophy” has become.
Yeah Brian, run Gilmore again . . . PLEASE. Letting the Dems go after him will be like beating an amputee at hopscotch.
Just once, it would be nice to talk about issues without personal attacks like “thick head” and “drooling idiot.”
Is that the best ya got?
Vivian, there are already separate boxes on the W-2 forms for such income — boxes 12a through 12d. Since we already have codes A through BB, adding code CC for overtime should not be a problem.
“You have assumed that all of the $433 million is the result of income taxes.”
No, I did not. I read the article: “[The] state Taxation Department released a “highly tentative” but “conservative” estimate that the proposal would cost Virginia $433 million in ANNUAL TAX REVENUE.” (Emphasis mine.)
As for the unemployment insurance, I do not see the problem, since the taxes are payroll taxes, not income taxes, and are paid by the employer, not the employee. How are contributions to 401(k) plans treated? The non-taxable portion of one’s overtime pay could be treated the same way.
The implementation of income taxes is already a nightmare. One more reason to scrap the whole system and have a sales tax instead.
GEM, thanks, but professionals are not allowed to unionize.
And I have built things, too, thank you very much. I have built things to go in sewers, and I have built things to go into space. I have worked cleaning grease pits, and I have worked hauling garbage. However, even those last two dirty jobs were for a non-profit corporation, so not only did I not get time-and-a-half, I did not get paid for the extra work at all.
Besides all that, I do prefer the car tax to the local income taxes that Maryland residents have to pay. If you don’t like the car tax, drive an old junker.
That is my theory drive a junker and live in a nice house. Much easier to unload that junker than your house. By the way Anon there are many so called professionals that are unionized and I deal with them everyday-engineers,nurses,teachers, psychiatrist,designers,etc… also even blue collar workers are profesionals nowadays with the high tech we deal with on a day to day basis. the term professional now adays is a great misnomer. Building our ships nowadays every trade deals in three dimensions, and cad-cam and blue prints. So we the midle class are in the same boat.
Right on Gene. On of the biggest misconceptions about unions is that they’re only for folks in jobs with their names on their shirts. There are unions and professional organizations that enforce professional ethics and working standards and lobby the government over regulation of their business practices, and you can make six figures and still be in one.
As a small business owner, I know an accounting nightmare in the making when I see one. I got into business so that I could make my own way in the world, see how successful I could be as a businessman and make enough money to support my family. I didn’t get into it for a love of paperwork, and I don’t need any more bookkeeping to manage when I could be out meeting new clients and growing my business. I think it’s telling the Vivian is coming out against Welch’s plan because as near as I can tell, Vivian and other CPAs are the folks who benefits most from it when I have to hire someone to figure out the tax law for me all over again.
Why don’t we just eliminate the income-tax nightmare and have a sales tax?