Alabama Governor Kay Ivey signed legislation to cut state income taxes on hardworking hourly workers’ overtime pay. The governor said that today’s economy is hurting working families and businesses across the country. This is why she has committed to providing relief in the pocketbooks of Alabamians and supporting businesses while also being responsible with taxpayer dollars.
House Bill 217 is sponsored by House Minority Leader Anthony Daniels (D-Huntsville). HB217 eliminates income taxes on all overtime pay for Alabama hourly workers. Prior to signing HB217, Governor Ivey added an executive amendment to remove the $25 million annual cap put on the bill by the Senate, move up the program’s sunset date to June 30, 2025, and add reporting requirements to better monitor the fiscal impact of the overtime-pay exemption on the State’s Education Trust Fund. Both Houses of the Legislature voted to concur with Gov. Ivey’s amendment on Tuesday.
After signing HB217, as amended, Gov. Ivey issued a statement:
“Today’s national economy presents challenges for working families, especially our blue-collar, hourly workers,” Gov. Ivey said. “The men and women of the Legislature, alongside my Administration, have worked diligently to provide relief to Alabamians wherever possible while also being mindful of the fact our budgets will not always be in a place of surplus. By eliminating state income taxes on all overtime pay, we are directly putting more hard-earned money into the pockets of our hardest, most dedicated workers and helping our employers overcome workforce shortages, which has become one of their biggest challenges. I appreciate Minority Leaders Daniels and the Legislature’s measured approach on this bill, and I’m proud to sign it into law.”
HB217 is the first bill of its kind in the nation. It completely eliminates the state’s 5% tax on overtime pay, or state income tax for hours worked above 40 in a week by hourly waged workers.
“This was a central component to our legislative agenda, the ‘Plan for Prosperity,’ to help the people of Alabama as they continue to deal with inflation and economic uncertainty,” Daniels said. “I believe that this will not only allow hard working Alabamians to keep more of what they earn, but it will also help businesses by helping them retain employees in a tight labor market.”
Both Houses of the Legislature passed HB217 unanimously. Speaker of the House Nathaniel Ledbetter (R-Rainsville) told reporters: “When Leader Daniels brought that to me my reaction was that I wish I had thought of that myself. It is a win, win, win for the state.”
“Certainly, I would like to thank my Republican colleagues for reaching across the aisle to help us get this bill over the finish line,” Daniels said. “The passage of this bill and the reduction in the state’s grocery tax show that legislators are truly listening to their constituents and taking meaningful action.”
The passage of HB217, combined with passage of legislation that will gradually reduce the 4 percent state tax on groceries beginning in September, plus $150 per tax filer in immediate tax rebates, means that the 2023 legislative session produced the largest tax relief package in the history of the state of Alabama.
The Alabama Constitution limits the regular legislative session to a maximum of thirty legislative days. Tuesday was the last day of the regular session. The next regular session will not begin until February 6, 2024, but Thursday’s Supreme Court ruling rejecting Alabama’s 2021 congressional redistricting makes it very likely that Gov. Ivey will have to call a second special session (the first addressed appropriating ARPA money) this fall to pass new congressional redistricting that complies with the Voting Rights Act of 1965.
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