House Finance Committee studies eliminating tax on overtime pay
Legislation would help workers keep more of their wages
Pennsylvania House Democratic Caucus June 23, 2025 | 4:58 PM
HARRISBURG, June 23 – Employees who are eligible to receive overtime pay work in some of the nation's most vital professions, such as nursing, health care, retail, hospitality, construction and manufacturing, for example. Many are not highly paid and must carefully manage their budgets to make ends meet. Today, the state House Finance Committee held a public hearing on legislation that would establish a state-level income tax credit for overtime wages, so that these hardworking employees get more back at tax season.
State Rep. Morgan Cephas, D-Phila., authored H.B. 1357 as a similar effort to those gaining bipartisan support in other state legislatures across the country and in the federal government.
“I believe this General Assembly can work collaboratively on this issue, given the increasing economic insecurities and high cost of living for housing, health care, groceries, and more, across the commonwealth,” said Cephas.
“Close to 25% of Pennsylvanians are struggling financially and working additional, unplanned hours to support their families and maintain their quality of life. Eliminating tax on overtime would address Pennsylvania’s labor shortage by making the state more attractive and competitive for employers, incentivizing through increased wages and job stability.
“Now is the time to consider measures that will help working families by putting more money in their pockets, while simultaneously making us a more competitive state for our workforce.”
House Finance Committee Chair Rep. Steve Samuelson, D-Northampton, supports the bill as a way for state government to help the financial stability of hardworking Pennsylvanians.
“Our caucus and this committee have been working on incentives and tax policies to help working families in PA. We’re getting solutions passed through committees with bipartisan support, like recruitment and retention initiatives, and the House passed our Working Pennsylvanians Tax Credit earlier this year. Incentivizing workers in high-priority occupations, like nursing and home health aides, with tax credits like this can help address the worker shortage in those professions.
“Additionally, this creates no added burden to employers, as they’re already withholding the personal income tax and the onus is on the employee to submit for the deduction on their tax forms at the end of the year.”
Regina Harrison, president and CEO of the African-American Chamber of Commerce of PA, NJ, and DE, said the bill is a formula for shared prosperity.
“This is smart public policy that strengthens both business owners and the workforce they rely on.
For many hourly workers overtime is not a luxury, it’s essential – this effort provides relief that represents and rewards that reality. The tax credit would provide meaningful financial benefit at the end of the year to support the high cost of living. This would also reinforce workforce stability and retention, knowing that there will be increased tax relief at the end of the year. House Bill 1357 is a strategic investment in the workers who drive our economy and the small business that depend on their labor and spending.”
Malik Brown, president and CEO, GraduatePhilly, testified that the bill promotes economic equity and financial relief for workers to invest in training and a better future for themselves and their families.
“In today’s economy, there are too many hardworking Pennsylvanians who are forced to take on more hours to meet basic needs. Working overtime is no longer about getting ahead - it’s become a lifeline to provide for families, leaving little time for career advancement or additional education and occupational growth. This would provide meaningful long-term benefits for those seeking to pursue post-secondary work, making it easier for workers to pay tuition, reduce debt, and avoid taking on additional student loans.”
Samuelson said the committee will review today’s testimony and he hopes to schedule a voting meeting on the bill in the near future.