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OAN Roy Francis
UPDATED 12:54 PM – Wednesday, May 3, 2023
The Alabama House of Representatives has unanimously passed a bill that will exempt overtime from the state income tax.
House Bill 217, which was introduced by House Minority Leader Anthony Daniels (D-Ala.), would exempt any hours worked over the 40-hour limit in a week from being calculated for state income tax purposes.
Daniels said the bill would be an incentive for work, will help employees keep more of what they earn, and would boost productivity and employee retention for businesses.
“All the prices are going up whether it’s the grocery store or retail or whatever it is,” Daniels said. “Everybody’s got ‘now hiring’ signs from Mobile to Huntsville.”
An amendment to the bill stated that the exemption will expire three years after it is passed, unless it is extended. The three-year period is meant to give lawmakers the chance to evaluate the impact of the new changes that have never been tried before.
Representative Danny Garrett (R-Ala.), Chairman of the House Education Budget committee, supported the bill saying that it would “get our labor force participation up.”
“It’s the first one we’ve seen like it in the country. It’s an incentive to get our labor force participation up, an incentive for people who are already working to work more,” Garrett said.
Fiscal notes from the Legislative Services Agency indicated that the bill would cost the Education Trust Fund $34 million in 2024, and a minimum of $45 million in yearly revenue for the following two years.
However, Daniels argued that a large portion of the tax revenue the state loses will return in the form of sales taxes to local and state government due to employees having more money to spend.
The bill received full bipartisan support and was passed by the House by a vote of 105-0. It now heads to the state Senate for approval.
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