The Alabama Legislature moved a series of targeted tax cut bills this week. Senate Pro Tem Greg Reed (R-Jasper) told reporters that the tax relief package totals around $100 million.
“The tax cuts are targeted to working families, retirees, and businesses,” Reed said.
Reed said the legislature is looking to see, “If there are resources that can go back to the people.”
Moving the tax cut legislation was a major goal of the legislature this week.
The State Senate passed HB82 by State Rep. Danny Garrett (R-Trussville), on Thursday, by a vote of 29 to zero. The legislation is targeted to help give tax relief to small businesses. The bill cleared the Senate Finance and Taxation Education Committee Wednesday.
State Sen. Arthur Orr (R-Decatur) chairs the powerful Finance and Taxation Education Committee.
“These are targeted tax cuts,” Orr said.
Senate Bill 19 is sponsored by Orr.
According to the fiscal note: Senate Bill 19 as passed the Senate would decrease individual income tax receipts to the Education Trust Fund by an estimated $12,923,000, beginning in fiscal year 2022 and an estimated $17,230,000 each year thereafter, by increasing:
(1) the threshold for the maximum dependent exemption from $20,000 to $50,000;
(2) the adjusted gross income floor for the optional standard deduction for taxpayers that are married filing jointly, head of family, and single from $23,000 to $25,500 and from $10,500 to $12,750 for taxpayers that are married filing separately; and
(3) the standard deduction amount from $4,000 to $5,000 for taxpayers that are married filing jointly and from $2,000 to $2,500 for taxpayers that are married filing separately, head of family and single.
SB19 has been approved by the Senate. The House Ways and Means Education Committee gave the bill a favorable report on Wednesday.
It is being carried in the House by State Rep. Lynn Greer (R-Rogersville) who sponsored HB163, which is the House version.
“We are taking the standard deduction and increasing it,” Greer said.
“This is a bill targeting tax relief to working families,” Garrett said. “The fiscal note indicates $17 million to the ETF and it will impact many, many families.”
State Rep. Terri Collins (R-Decatur) made the motion to give the bill a favorable report.
House Bill 162 and Senate Bill 18 are targeted to help retirees.
According to the fiscal report, SB18, “As introduced would allow a taxpayer who is 65 years old or older to exempt from income tax $10,000 of the distributions from a defined contribution deferred compensation plan, up to the caps set by this bill. Beginning with Tax Year 2023 the maximum exemption amount would be $5,000 and would increase to a maximum of $10,000 in Tax Year 2024. According to the Department of Revenue, this bill would decrease receipts to the Education Trust Fund by a maximum of ($25,000,000) in FY 2024 and by a maximum of ($40,000,000) in FY 2025 and each fiscal year thereafter.”
SB18, which is sponsored by Orr, passed the Senate this week by a vote of 28 to 0.
HB162, the House version, was given a favorable report in the Ways and Means Education Committee on Wednesday.
Greer said that retirees with a defined benefit plan (pension) are not taxed at all by the state of Alabama. Retirees whose plan was a 401k or IRA pay state taxes on all of their retirement income. Greer said that the fiscal note is out of date as the bill was substituted last Friday. According to Greer, HB162 would allow a taxpayer who is 65 years older to have the first $6,000 for an individual exempt and $12,000 for a couple.
The fiscal note for HB162 (as introduced) is “House Bill 162 as introduced would exempt certain distributions from defined contribution deferred compensation plans received by individuals who are 65 years of age and older from state income tax. According to the Department of Revenue, this bill would reduce income tax receipts to the Education Trust Fund by the following estimated amounts in the following tax years:
Collins thanked Greer, who has introduced versions of this legislation in previous legislative sessions, for all of his work on this.
“I started in 2011 and I sat next to you,” Collins said. “I heard about it then. You have been working on it this whole time.”
The legislation does not apply to retirees younger than 65 as the legislature did not want to encourage people to leave the workforce. Including early retirees would have also made the cost of the tax cuts even higher.
The committee gave a favorable report to HB162 on Wednesday. It can now be considered by the full House of Representatives as soon as Tuesday.
Thursday was day 12 of the 2022 Alabama Regular Legislative Session. The Constitution of 1901 limits the state legislature to a regular legislative session of no more than thirty legislative days and no more than 120 calendar days.
Reed told reporters that he expects that the state general fund budget (SGF) will be addressed next week in the first House. Orr told his committee that they will get the education trust budget in two weeks. Passing the two state budgets is the primary reason for the regular session under the Alabama constitution.
To connect with the author of this story, or to comment, email brandon.moseley@1819News.com.
