MONTGOMERY — As tax cuts continue to carry the thunder of the legislative session’s final days, lawmakers from both sides of the aisle made a timely push to become the first state in the nation to un-tax income-earned overtime.
“From a productivity standpoint, it gives the workers an opportunity to make more money without the employer having to actually give a pay raise,” Rep. Anthony Daniels (D-Huntsville), the House Minority Leader, said Wednesday. “It’s basically a 5% pay raise every hour. It makes good sense for working people in Alabama.”
Hourly workers and those working overtime are taxed at 5% state income tax of any hour after the 40-hour mark. Overtime is calculated at a minimum time-and-a-half the regular rate of pay.
“This basically is more money in your pocket. And that’s what we’re going for,” Daniels said. “Rewarding hard work.”
Daniels was joined by GOP leadership including Speaker of the House Nathaniel Ledbetter (R-Rainsville).
“When Leader Daniels brought this bill and asked me to co-sponsor, I don’t co sponsor many bills, but this was one of them,” Ledbetter said. “I felt strongly about it because I know the people that works every day that earn a living for their family, it’s a big deal.”
The overtime tax cut passed the Senate Education Finance Committee just a few hours later with several changes as the proposal moves closer to law. It could be voted on by the Senate and sent to Gov. Kay Ivey as soon as Thursday.
As the sponsor of the bill in the Senate, Sen. Sam Givhan (R-Huntsville) also spoke in support of the idea and hopes Alabama will lead the way on cutting taxes for those who are contributing an extra mile.
“I wanted to show strong bipartisan commitment to the working people and families of Alabama because that is what makes us a great place to do business,” Givhan said. “I just hope that the Senate will follow the lead of the House.
“And I hope that our federal government will take our lead and give this relief to the working people of Alabama.”
Alongside Thursday’s impending Senate vote to cut the overtime income tax will be a final approval of a grocery tax cut, ushered forward by a nearly-unanimous group of legislators.
With the 2023 legislative session coming to a close, it’s on track to become a historic year for Alabama taxpayers.