After being at the tail end of a bevy of criticism for his decision to allow the state's exemption on overtime tax to expire, House Speaker Nathaniel Ledbetter (R-Rainsville) says he is not opposed to revisiting the issue next year.
Lawmakers passed a law in 2023 that ended the state's taxation of money earned through overtime pay. The bill, sponsored by House Minority Leader Anthony Daniels (D-Huntsville), passed the legislature but contained a sunset provision, meaning it would require a legislative continuation or expire. The initial sunset provision expired the tax cut in 2027 and capped the total exemption amount at $25 million. However, Gov. Kay Ivey issued an executive amendment removing the cap but changing the sunset to June 2025.
The total fiscal impact on the state's Education Trust Fund (ETF) was initially reported to be $34 million. However, while the exact impact is unavailable, a report by the Alabama Department of Revenue suggested the effect could be as much as $230 million. That number would likely be higher in a full fiscal year, as the bill went into effect in the second quarter of the 2024 fiscal year.
Daniels filed a bill to continue the tax cuts, gaining bipartisan support. However, House leadership decided to let the law sunset, believing the hit to the ETF would be too much, especially with state leaders advising caution on declining state revenues.
Daniels, however, claimed the tax cut actually increased labor force participation in occupations that offer overtime. He also stated the Revenue Department's estimates were baseless speculation.
This week, after the legislature adjourned for the final day of the 2025 legislative session, Ledbetter told reporters he was not opposed to revisiting the tax cut next year, albeit with caution.
"Listen, I'm not opposed to the overtime tax [cut]," Ledbetter said. "I supported it. I was a co-sponsor on it. But we got to do it physically, too. And I think we'll probably revisit that. I spoke with Leader Daniels about that. You know, I think there may be a way to do it. It may have to be quarterly, however, that is, but we need to look at it.
He continued, "I'm proud of the body and proud of the accomplishments from them. And we've done it without sacrificing budgets. You know, it's easy to try to tout, 'you need to do more and you need to do this,' but the bottom line is, we're the ones that's got to govern. And we're the ones that's got to make sure the money's in the coffers to pay those agencies when they have to pay their employees or to pay emergency services, or whatever with ALEA. So, it's our job to do that, and at the end of the day, I think we've done a good job of that."
To connect with the author of this story or to comment, email [email protected].
Don't miss out! Subscribe to our newsletter and get our top stories every weekday morning.
