Tuesday marked the 14th of 30 possible days of Alabama’s 2023 regular legislative session. With the session nearly halfway complete, State House Speaker Nathaniel Ledbetter (R-Rainsville) says that momentum for permanent tax relief is growing.
It seems lawmakers are starting to realize what so many Alabamians have already determined: permanent tax cuts are more beneficial than a one-time check.
Several relief proposals have been introduced in the first half of the session, most notably Gov. Kay Ivey’s plan to use nearly $1 billion of the state Education Trust Fund’s $2.8 billion surplus to provide $400 one-time rebate checks to Alabamians. Other proposals include repealing the state’s 2% income tax bracket, lowering Alabama’s top individual income tax rate from 5% to 4.95%, raising the tax exemption for retirement income for Alabamians over age 65, and repealing a portion of the state’s sales tax on groceries.
Ledbetter recently met with the four House and Senate budget committee chairmen and asked them if they would rather pursue a rebate or permanent tax cuts. “[A]ll of them wanted the tax cut, so I knew then the momentum was building,” he said. “[F]rom a long-term aspect, a tax cut is better, in my opinion.”
This lines up with recent polling from the Alabama Republican Party, showing that 83% of Republicans and 80% of Democrats prefer a permanent tax cut — specifically the grocery tax repeal — over a one-time rebate. Based on Ledbetter’s recent discussions with top lawmakers, it seems legislators hear what citizens are saying.
This is an about face from where most lawmakers were just a few months ago. Late last year it seemed a one-time rebate was a foregone conclusion, and beyond a few minimal changes to Alabama’s tax code, wide-reaching permanent relief was off the table.
In October, State Senate Education Budget Committee Chairman Arthur Orr (R-Decatur) floated the idea of rebates ranging from $150-$200 for single tax filers and $200-$400 for married couples. Since the session began last month, he has introduced at least three bills to reduce income taxes and a bill to partially repeal the state’s grocery tax. Those proposals would save Alabamians approximately $300 million annually.
Orr’s House counterpart, State Rep. Danny Garrett (R-Trussville), who also seemed reluctant to pursue broad tax relief, has now introduced the same bills. Two of Garrett’s income tax cuts bills have passed the House and a third is set for a committee hearing on Wednesday.
In December, State House General Fund Committee Chairman Rex Reynolds (R-Huntsville), gave only tacit approval of even a one-time rebate, implying that permanent relief was unlikely to come from the state General Fund budget because there are “still additional needs that are vital to [the] service of all Alabamians.” In other words, increased government spending was the prevailing priority. Now Reynolds appears to be open to permanent relief.
Based on Ledbetter’s comments, we can assume the same is true of State Senate General Fund Chairman Greg Albritton (R-Atmore). "While y'all are focusing on how flush it appears that we are,” he said last year, “I'm looking at what the problems are and how we're going to resolve them." He then suggested putting the state’s record surplus into a new savings account that could later be used to fund education programs.
Why the change in attitudes?
For one thing, 21 states cut income tax rates between 2021 and 2022. Alabama was not one of them. Meanwhile, our neighbors in Mississippi, Florida, and Georgia passed the largest tax cuts in state history. Over that same period, Alabama’s budget surpluses continued to swell, doubling from $1.5 billion to $3 billion by the end of 2022.
Alabamians saw more taxes collected from them than ever before, all while watching other states reduce the tax burden on citizens. Now Alabama residents are demanding the same.
Tax relief is almost certainly coming. What form that relief takes remains to be seen. To be sure, Ivey will have a say. If she is set on rebates or nothing, legislators may be forced to follow her lead. But perhaps she too will hear the calls of Alabamians and be open to wide-ranging, immediate, and permanent relief, like repealing the grocery tax.
Lawmakers are elected to represent the priorities of the people. Alabamians have made it clear that they don’t want a rebate check. Top lawmakers are now on the same page. Will Gov. Ivey listen?
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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