Thursday marks the 29th day of the 2023 regular legislative session, meaning that just one day remains for the Alabama Legislature to wrap up its work. Time is running out. Many bills that sought to reduce the tax burden of Alabamians have officially died.
But several tax relief bills remained alive as Wednesday’s committee meetings wrapped up.
House Bill 217 by State Rep. Anthony Daniels (D-Huntsville), exempting overtime wages from Alabama income taxes, received approval from the Senate Finance and Taxation Education Committee Wednesday, setting it up for a floor vote as soon as Thursday.
The committee’s approval did not come without changes. Calling the legislation “an excellent bill,” chairman Arthur Orr (R-Decatur) proposed an amendment to only exclude the first $2,000 in overtime wages. The change would cut the amount of savings to Alabama taxpayers from an estimated $45 million annually to a high of $21.6 million through 2026.
This reduced relief is better than nothing, but the proposed change lessens the positive impact of the bill, which was a mechanism to encourage Alabamians to work longer hours, subsequently reducing the state’s current labor shortage. Daniels opposes the cap saying it “is equivalent to one hour of overtime work a week,” and thus didn’t make sense to him. Assuming the bill passes the Senate, the cap could receive further debate in a conference committee.
The other major tax relief legislation passed by the Senate education budget committee Wednesday was HB 479 by State Rep. Danny Garrett (R-Trussville). It would repeal half of the state’s 4% sales tax on groceries over the next two years. All but five members of the legislature co-sponsored the bill.
During the committee debate, the sponsor, State Sen. Andrew Jones (R-Centre), and chairman Orr said a floor substitute would be coming during final debate, and on Thursday it did. Jones indicated that the substitute would “tweak the growth metric” that must be met for the second phase of the repeal to take effect. The Senate floor substitute requires projected Education Trust Fund (ETF) growth of at least 3.5% for the second rate decrease to occur.
Other relief bills passed by the Senate Finance and Taxation Education committee Wednesday and now set up for final passage include House Bill 175, which would provide a $150 to $300 refundable tax credit check to taxpayers. A bill to exempt the purchase of gun safes and other safety devices from state and local sales taxes was also approved by the committee. It could serve to promote gun safety.
With no other tax relief bills set to be heard by committees on Thursday, several tax relief and credit bills have officially died, including a trio of bills advanced by Garrett which would have decreased income tax rates and provided a larger tax exemption for retirees. Despite passing the House, none of the bills received Senate committee hearings. The proposals would have saved Alabamians nearly $100 million per year.
House Bill 208 by State Rep. Jamie Kiel (R-Russellville) would have provided a tax credit for donations made to pregnancy resource centers and maternity homes. It never received a Senate committee hearing. The bill could have better equipped the centers to meet the needs of mothers and their children.
As things stood Thursday morning, the overtime tax exemption and grocery tax repeal would save taxpayers just under $340 million per year when fully implemented. The overtime exemption and its $21.6 million in savings would sunset in 2026.
The $340 million represents only 3.2% of total ETF revenues collected in 2022. The fund had $2.8 billion in surplus revenues entering this year, with another large surplus projected for 2024. Average ETF annual revenue growth was 10.7% over the last five years.
While the proposals still being debated are not insignificant, the legislature could and should do more to take less from hard-working Alabamians.
Justin Bogie serves as Fiscal and Budget Reporter for 1819 News. The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News. To comment, please send an email with your name and contact information to: Commentary@1819News.com.
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