Two bills offering tax cuts to Alabamians passed through the State House Ways and Means Committee on Wednesday.

The two bills, both sponsored by State Rep. Danny Garrett (R-Trussville), are designed to cut state taxes at Alabama's highest and lowest brackets.

"What we're looking at are tax cuts that we think are targeted to specific groups that we think need some tax relief that are also sustainable; we believe the fiscal impact is not such that it would jeopardize future budgets," Garrett said.  

House Bill 116 (HB116) would remove the lowest tax bracket in the state, which currently taxes 2% of the person's income.

"What this bill would do is basically eliminate the 2% tax rate in Alabama," Garrett continued. "Right now, Alabama taxpayers, individual income taxpayers pay rates of 2, 3, 4, and 5% based on your income levels. The threshold for being taxed at 2% is, for individuals, $500. If you're a couple filing joint, it's $1,000. So we only tax the first $500. …So what this bill would do would be to eliminate that 2% bracket.

The fiscal impact of HB116 is reported at a loss of $17.9 million a year.

The second bill, House Bill 115 (HB115), would reduce the top state income tax bracket from 5% to 4.95% over the next five years.

The decrease would titrate down .01% each year from fiscal year 2022 to fiscal year 2027.

"This bill is basically targeting everyone who pays tax in Alabama, who makes over $3,000 if your single, or $6,000 if you're a married couple filing jointly," Garrett said. "So this would be the bulk of Alabamians."

According to Garrett, the fiscal impact on the state would be $6 million in 2023, $15 million in 2024, $25 million in 2025, $36 million in 2026, $48 million in 2027 and $54 million every year thereafter.

Both bills unanimously passed the committee with two technical, non-substantive amendments.

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