Oregon House Bill 2234 exempts overtime pay from personal income tax starting 2026

Oregon House Bill 2234 is making waves in the state legislature by proposing a significant change to how overtime pay is taxed. Introduced on January 13, 2025, by Representative Boshart Davis, the bill aims to exempt overtime earnings from personal income tax, a move that could impact thousands of workers across Oregon.

The bill outlines a personal income tax subtraction for overtime pay received during the tax year, applicable to tax years starting January 1, 2026, through January 1, 2032. This means that any overtime compensation reported on federal tax returns would not be subject to state income tax, potentially providing substantial financial relief to workers who often put in extra hours.

Supporters of the bill argue that this measure will help alleviate the financial burden on workers, particularly in industries where overtime is common. They contend that by not taxing overtime, the state can support its workforce and encourage more hours of work, which could lead to increased productivity and economic growth.

However, the bill has sparked debates among lawmakers and economists. Critics express concerns about the potential loss of state revenue, which could impact funding for essential services. They argue that while the intention is to support workers, the long-term implications for the state budget need careful consideration.

As the bill progresses through the legislative process, its economic implications are under scrutiny. Experts suggest that while it may benefit individual workers, the overall impact on state finances and public services could be significant. The bill is set to take effect 91 days after the legislative session concludes, pending approval.

With the potential to reshape how overtime pay is treated in Oregon, House Bill 2234 is poised to be a pivotal topic in the ongoing discussions about tax reform and worker rights in the state. As the legislature debates its merits, the outcome could set a precedent for how states approach taxation of overtime in the future.