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SB 207

AN ACT EXEMPTING OVERTIME INCOME FROM THE PERSONAL INCOME TAX.

2026 Regular Session Introduced by M.D. Rahman

Connecticut bill exempts overtime wages from state income tax to increase worker take-home pay but risks reducing state revenue without addressing budget impacts.

REF. TO JOINT COMM. ON Finance, Revenue and Bonding
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Bill Summary · SB 207

Legislative bill overview

SB 207 would exempt overtime income from Connecticut's personal income tax, allowing workers to keep all earnings from hours worked beyond standard employment requirements. The bill targets the state's income tax code to create a specific carve-out for overtime compensation across all wage-earning employees.

Why is this important

Connecticut has the highest per-capita income tax burden in the nation, and this proposal directly addresses take-home pay for working individuals. For workers earning overtime—particularly in healthcare, manufacturing, and emergency services—this could mean measurable monthly financial relief while potentially encouraging workforce participation in industries with chronic labor shortages.

Potential points of contention

  • State revenue impact: Connecticut faces chronic budget challenges; exempting a tax category reduces general fund revenues without identified funding mechanisms for current spending commitments
  • Equity questions: The benefit flows disproportionately to workers in industries with available overtime, potentially excluding salaried employees, gig workers, and those in sectors without overtime opportunities
  • Administrative complexity: Distinguishing "overtime income" from regular wages in tax filings creates new compliance burdens for employers and the Department of Revenue Services, increasing enforcement costs
  • Economic modeling gaps: Unclear whether the tax break stimulates additional work hours or simply reduces revenue from existing overtime, affecting cost-benefit analysis

Compiled from official sources — confirm details with the bill’s official record.

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