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Legislature approves bill to slow future occupational taxes

By CAROLINE BECK, Alabama Daily News

MONTGOMERY, Ala. – The Alabama State Senate on Thursday voted along party lines to give final approval to legislation slowing cities’ ability to pass local occupational taxes.

House Bill 147, sponsored by Rep. Chris Sells, R-Greenville, limits municipalities from enacting occupational taxes by requiring any such policy to pass the Legislature as local legislation. Democrats argued strongly against the bill, saying it unfairly hurts the Capital City of Montgomery, which passed an occupational tax last week.

The Senate debated the bill for more than three hours before passing it on a 27-7 vote. It now goes to Gov. Kay Ivey, whose office previously signaled support for it.

Sen. Clyde Chambliss, R-Prattville, carried the bill in the Senate and said it isn’t about hurting cities but about giving accurate representation for taxpayers.

“It does not unduly restrict occupational taxes,” Chambliss said on the Senate floor. “It simply gives those subjected to the tax a vote.”

Proponents have argued that city occupational taxes are unfair to those who work in a city but live outside of it.

Senate Democrats argued that the state constitution gives cities the right to pass occupational taxes and that such measures are sometimes needed in order to properly fund city services.

“The constitution has given municipalities taxing and spending power. Here we are, the Legislature of Alabama, trying to play big brother and (insert) ourselves on a municipal government that has a total separation from where we are,” Minority Leader Bobby Singleton, D-Greensboro, said.

In the wake of Sells’ bill moving in the Legislature, the Montgomery City Council last week approved an ordinance implementing a 1% occupational tax on all those working inside the city limits in 2021.

Sells’ bill would not apply to cities that have already enacted occupational taxes. The bill is set to be retroactive to February 1, which could apply to the Montgomery occupational tax effort, though a dispute on which takes precedence is likely to end up in court.

Montgomery’s effort has been in the spotlight as of late, but the bill would apply statewide. Around 25 cities already have an occupational tax, according to the Alabama League of Municipalities.

Mayors from the state’s 10 largest cities, including Auburn, Birmingham, Hoover, Decatur, Huntsville, Madison, Mobile and Tuscaloosa, sent a letter opposing the bill to lawmakers last week.

“Our opposition to the bill extends beyond a possible ban on new occupational taxes,” the letter said. “We are opposed to the bill’s assault on local governance. No municipal official desires to irresponsibly raise taxes.”

Chambliss said this was not about punishing Montgomery and that a similar bill was passed out of the Senate last year.

Sen. David Burkett, D-Montgomery, said this bill specifically hurt the city of Montgomery.

“Why is this legislative body treating Montgomery this way?” Burkett asked during discussion on the bill. “It think it’s clearly disrespectful and it’s really none of our business. This is a municipality issue.”

Singleton offered a substitute bill that would allow the city of Montgomery’s tax to change from 1% to .5%. Singleton said the city and the Alabama League of Municipalities supported the substitute bill. It failed on a 23-9 vote.

Senate Pro Tem Del Marsh, R-Anniston, said he supported Singleton’s substitute.

“My problem has been is that you have 20-plus cities that have already (created occupational taxes); to me there should have been a compromise (to allow cities without the tax) to come up to a point where other cities already were or reduce it across the board and treat everybody the same,” Marsh told reporters.

Marsh said he would rather the state not have occupational taxes at all but that was not part of the legislation.

“I personally have a problem with people being taxed to work, so in my opinion, if you want to do away with it do away with it across the board but that was not considered,” Marsh said.

An amendment to the bill was proposed by Sen. Linda Coleman-Madison, D-Birmingham, to move the date the bill would go into effect so it wouldn’t affect Montgomery, but that amendment failed.

Another amendment was proposed by Sen. Vivian Figures, D-Mobile, that would exclude the city of Mobile from applying under the bill. Members from the Mobile delegation, including Republican senators, voted in support of it but the motion eventually failed.

Sen. Andrew Jones, R-Centre, voted yes on the final passage of the bill and said occupational taxes hurt Alabama’s economic growth.

“To me this is a tax that hurts industry,” Jones said. “I don’t know why an industry would choose to locate in an area where they could go next door and their workers can take home 2% more in their paycheck.”

Jones said that there are five cities in his district of Etowah County that have an occupational tax and that they struggle to recruit industry there.

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