On Tuesday, the Alabama House of Representatives voted to pass legislation eliminating all state income taxes on workers getting paid overtime. The sponsor estimates this amount to be a $40 million income tax cut for hourly workers.
House Bill 217 (HB217) is sponsored by House Minority Leader Anthony Daniels.
“This will put money back into the local economy because those workers will spend that money in their local areas,” Daniels explained. “This helps the hourly workers.”
Daniels was asked what states have this.
“This is a new idea that has never been tested, which is why we have a three-year sunset in case we need to go back and look at this,” Daniels said. “A lot of employers say that their employers will not work overtime because of the tax hit that they receive. This will allow companies to increased production with a smaller workforce.”
Rep. Barbara Drummond said, “You have created a box that no one else has. I applaud you for bringing this bill.”
Rep. Danny Garrett said, “The three-year sunset is so that we have an opportunity to evaluate it.”
“I think this gets our labor force participation and productivity up,” Garrett said.
Rep. Napoleon Bracy said, “In my day job, I have a responsibility to hire 1,200 people in the next three years. It is very hard to find them. The craft workers at our facility work Monday through Thursday ten hours a day. They are off Friday, Saturday, and Sunday. It is real hard to get them to come in on their off days because the tax burden is so heavy on them.”
“The hospitals are real excited about this,” Bracy added. “This lets us get more from the workers that we already have.”
State Rep. John Rogers asked, “How much is this going to cost the employer?”
Daniels said, “This will cost the employer nothing. For the employee, they will see less money taken from their checks.”
Rogers asked, “This will help us with corrections officers?”
Daniels said, “This will encourage them to work longer hours because they get to keep more of that money.”
House Majority Leader Scott Stadthagen said, “This is what we are down here for to make a difference.”
“From what I am hearing along the borders, they are losing workers to other states,” Daniels said. “This will help with that.”
The House voted to adopt the committee sub.
State Rep. Paul Lee asked, “What does an employer have to do?”
Daniels answered, “They just don’t collect the tax after the first forty hours. There are no fines or fees with this.”
“This will not go into effect this calendar year,” Daniels explained. “This will go into effect in the next calendar year.”
“The cost will be about $45 million,” Daniels estimated.
The lost revenue will come from the education trust fund (ETF) budget.
“The local economy will benefit more from this than the state,” Daniels said. What workers would have paid in income taxes will be spent at local stores and businesses, so that will bring in $1.8 million in additional sales taxes.”
Lee said, “This is a very good Republican bill, and I appreciate you bringing it.”
HB217 passed the House of Representatives 105 to 0. 100 members signed on as cosponsors of this legislation. This legislation will now go to the Senate for their consideration.
Wednesday will be day 17 of the 2023 Alabama Regular Legislative Session.
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