The Alabama Senate voted on Tuesday 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 during the House debate. Greer explained that retirees with a pension- a defined benefit plan - already pay no state income taxes on their retirement income.
Greer said that HB162 would exempt from taxes the first $6,000 of a defined contribution plan.
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 at the time.
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 $6,000.”
HB162 passed the Alabama Senate 28-0.
HB162 was amended by the Senate Finance and Taxation Education Committee to name the bill the Lynn Greer Retirement Income Tax Cut Act of 2022. Because the bill was amended in the Senate, it still has to go back to the House of Representatives for consideration of the Senate change. The House is expected to vote in concurrence.
Greer has long advocated for this and other more substantive changes to Alabama’s tax codes to make the state more friendly for retirees.
HB162 was a cornerstone of the legislature’s tax cut package for 2022. Given the record revenues that both state budgets are experiencing, some critics suggest that the state could have gone further, such as eliminating the state sales tax on groceries.
Wednesday will be day 28 of the 2022 Alabama Regular Legislative Session. The 1901 Constitution limits the legislature to just 30 days in a regular session so there is a maximum of three days left in the regular session.
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