Bills to cut in half the state’s sales tax on groceries and take the income tax off of hourly workers’ overtime pay cleared a Senate committee on Wednesday.
But changes to the House-approved bills mean they need at least two more favorable votes with only two days remaining in the Legislature’s session.
The Senate Finance and Taxation Education Committee on Wednesday approved the plan to gradually take the state sales tax on grocery items from 4% to 2%, but sponsor Sen. Andrew Jones, R-Centre, said a substitute bill will be introduced on the Senate floor. Assuming it’s approved there, it will go back to the House for final passage.
Jones said the changes have to do with requests by the Association of County Commissions of Alabama and changing the revenue growth requirement. As currently written, the sales tax on food would be dropped gradually as long as total revenues to the Education Trust Fund grow by at least 2% each year. It also bars cities and counties from raising their own local sales taxes.
The tax cut on groceries would save Alabamians more than $300 million per year — tax revenue that would otherwise flow to the education budget.
The bill has amassed unprecedented bipartisan support this year, garnering 100 co-sponsors in the House and 35 in the Senate.
With dozens of tax cut and exemption bills filed in the Legislature this year, the Senate is proving to be more cautious about tax cuts than their House counterparts, warning that the revenue bounty the state has seen in recent years won’t last.
The Senate committee chaired by Sen. Arthur Orr, R-Decatur, approved but reduced the financial impact of several other tax-related bills on Wednesday.
Similarly, Rep. Anthony Daniels’ bill to take the state’s 5% income tax off of worker’s overtime pay was amended in the committee. Orr proposed an amendment to cap the tax break at $2,000 per year, per taxpayer. That change would reduce the bill’s impact on the state’s Education Trust Fund from about $45.3 million to about $21 million per year. The tax cut would end after three years if not renewed by lawmakers.
Orr called Daniels’ bill an “excellent concept” that could become permanent, but said the state should move slowly with it. Sen. Bobby Singleton, D-Greensboro, voted against the change, saying it would gut a bill that could help Alabama families.
After the meeting, Daniels told Alabama Daily News he was disappointed by the committee change and said it’s not necessary.
“I’m not for the cap,” he said. “I think it’s a reasonable bill, you’ve got a three-year sunset, I think that at the very least, that sunset expires before (the full implementation of the grocery tax bill), so the overtime tax is only $45 million, and $34 million after that which has little impact but it rewards hard work and hourly workers, so it’s a no-brainer.
“The $2,000 (cap) is equivalent to one hour of overtime a week. That doesn’t make sense to me.”
A bipartisan group of House and Senate members held a press conference Wednesday morning to advocate for that bill. Daniels, D-Huntsville, said it would allow Alabama industries to better compete for workers with other states and it would improve productivity. This bill would also apply to public employees like corrections officers, according to Daniels.
“From a productivity standpoint, it gives the workers an opportunity to make more money without the employer having to actually give a pay raise,” he said.
Speaker of the House Nathaniel Ledbetter, R-Rainsville, said emergency service workers would be among those to benefit from the bill.
“Firefighters don’t quit because the clock strikes 4 and it’s time to get home,” Ledbetter said. “They quit working when the job’s done.”
Daniels has said the state would initially lose income tax revenue but citizens would then use that money to pay for goods and services that are taxed, putting the money back into the state’s economy.
Other tax bills
The Senate Finance and Taxation Education Committee on Wednesday moved closer to final passage several other tax and revenue-related bills, including House Bill 375 by Rep. Matt Simpson, R-Daphne, to remove the state sales tax off of gun safes and gun safety devices.
“This bill is about incentivizing people to invest in gun safety,” Simpson told Alabama Daily News. “By creating a tax rebate for purchasing items like gun safes, we are empowering more citizens to be able to purchase these protective devices that will help better keep their guns safe and secure.”
House Bill 334 by Reps. Danny Garrett, R-Trussville, and Terri Collins, R-Decatur, creates the “Students with Unique Needs Education Scholarship Account Program” to allow students with special education needs, students in foster care and students in military families who were not enrolled in public schools the previous year to take state money to private school settings. The program in its first year would cost the state $3 million and increase in subsequent years, according to a fiscal note.
House Bill 133, by Rep. Neil Rafferty, D-Birmingham, to create an income tax incentive program for health workers who train students enrolled in certain health profession programs. The program could cost about $780,000 per year from the ETF.
House Bill 429, sponsored by Rep. Jamie Kiel, R-Russellville, as originally proposed would have expanded the existing $20 million annual cap on tax rebates for film and television industry expenditures. In committee Wednesday, it was amended to keep the cap at $20 million and allow the music industry to qualify for the credits.
House Bill 293 by Rep. Chip Brown, R-Hollingers Island, would not raise the $12 million cap on incentives currently offered to industries who ship from Alabama’s ports, but would modify how it is used to increase usage of the docks.
“It’s going to make us more competitive against our neighboring states,” Brown said.
House Bill 253, by Rep. Adline Clarke, D-Mobile, changes the existing historic rehabilitation tax credits to be claimed in the year in which the credit is awarded, not when the project is placed in service.
Alabama Daily News’ Anna Barrett and Alexander Willis contributed to this report.