Sen. Andrew Jones, R-Centre, plans to again introduce in the Alabama Legislature a bill to phase out occupational taxes in the more than two dozen cities that have them.
It will likely be similar to last year’s Senate Bill 44.
“To me, the occupational tax is a disincentive for working, and it is something that also hurts economic development,” Jones told Alabama Daily News. “When people in my district look at economic development and job growth, one key reason we’ve been lacking in success is occupational taxes.”
The cities of Gadsden, Glencoe, Attalla, Rainbow City and Southside, all a part of Jones’ district, levy a 2% occupational tax — the highest in the state. Jones says he has seen the adverse effects of occupational taxes on the workforce firsthand.
“If two cities are competing to get a major employer, this (occupational taxes) could be a deal breaker in a lot of cases because that employer knows if they come to Etowah County, their employee is going to make 2% less than they would anywhere else,” Jones said.
According to city reported information to the Alabama League of Municipalities, 26 cities have occupational taxes. Occupational taxes are levied on employees that work within these cities regardless of where they reside.
The league spoke against the bill last year and continues to oppose legislation that would ultimately remove occupational taxes.
“Alabama has 464 municipalities, each with unique opportunities and challenges; therefore, it is our organization’s mission to protect measures that are in place which allow for local decisions to be made at the local level, one of those being the ability to maintain or implement an occupational tax,” Greg Cochran, league executive director, said.
The Legislature has previously made strides to restrict city governments on this issue. In 2020, Alabama passed a law restricting cities from implementing new occupational taxes without the Legislature’s approval. Cities that already had the tax on the books were grandfathered in.
Last year, Jones’ bill proposed a decrease in current occupational taxes by .1% per year until they’re eliminated, a decrease he continues to deem essential for Alabama workers.
Cochran said the tax dollars are used to provide services used by those who work in a city.
“The revenue collected from an occupational tax, for communities that have chosen to implement it, is used to sustain essential quality of life services, such as law enforcement, fire, infrastructure, education, etc., all of which citizens not only expect, but demand,” Cochran said. “To reduce, eliminate or alter a city or town’s ability to provide essential services to its citizens is an attack on local resources, and the league’s advocacy team will actively work to defeat any legislation considered harmful to municipalities or the function of local government.”
Since last year after falling short in the State Government Affairs Committee, Jones says he has had conversations with colleagues and the league in hopes of producing a bill that will promote work rather than penalizing Alabamians for working.
“At the end of the day, I want a good bill. A good, solid piece of legislation that’s going to pass and something that’s going to turn the page and do some things to encourage people to work.”
Jones hopes to file this year’s bill by the first week of the legislative session in early March.