The Alabama House of Representatives voted to cut state income taxes for elderly retirees with 401ks and IRAs.
House Bill 162 (HB162) is sponsored by State Rep. Lynn Greer (R-Rogersville).
“There are two types of retirements: defined benefit plans including government pensions, and defined contribution plans," Greer said.
Greer explained that retirees with a pension, a defined benefit plan, already pay no state income taxes on their retirement income under that plan.
“The defined benefit plan costs the state over $464 million,” Greer said. “This does not change that.”
Greer explained that HB162 would exempt from taxes the first $6000 of a defined contribution plan.
“Texas, Florida, and Tennessee have no income tax,” Greer pointed out.
The state of Alabama has a five percent state income tax.
Greer’s original bill would have exempted the first $30,000 of a defined contribution plan. The Ways and Means Education Committee felt that was too costly for the state and lowered it to the first $6,000.
“The bill that I introduced would cost $76 million, but this bill would cost $24 million,” Greer said.
State Rep. Danny Garrett (R-Trussville) said, “This is an essential piece of tax reform.”
Garrett chairs the powerful Ways and Means Education Committee.
State Rep. Arnold Mooney (R-Indian Springs) praised Greer saying that he has been, “Passionate to solve a major problem in the state.
“If you belong to some group or organization, you do quite well with the Alabama legislature," Mooney said. "But if you are an average working family you don’t do so well with the legislature. This makes them [average working families] part of the group
“This is one of the few things we have done to give back to the people of Alabama.”
Greer said that the substitute version of HB162 “Copies Louisiana and exempts the first $6,000 of taxable (retirement) income.
“You have got to be 65,” Greer explained. “Once you become 65 you become exempt up to $6000.”
HB162 passed the Alabama House of Representatives 100-0.
“The people of Alabama should be grateful to the Speaker of the House and the Chairman of the Ways and Means Education committee for the passage of this bill,” Greer said, thanking the membership and leadership for voting for passage of HB162.
The legislation now goes to the Senate for their consideration.
Thursday will be day 21 of the 2022 Alabama Regular Legislative Session. The 1901 Constitution limits the legislature to just 30 days in a regular session.
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