Two bills in the Alabama Legislature could reduce the tax burden on people working more than 40 hours per week and possibly boost the state’s workforce participation rate.
House Bill 217 and Senate Bill 137 would exempt a full-time worker’s earnings once they exceed 40 hours of work per week. Both bills, if they become law, would go into effect Jan. 1.
According to federal law, a minimum wage worker earns $7.25 per hour in Alabama and time and a half (a wage of $10.87) for every hour worked more than 40. According to state law, this overtime is taxed at the highest bracket (5%) if the worker makes more than $3,000 per year or $5,000 per year if filing a joint return.
HB217 is authored by state Rep. Anthony Daniels, D-Huntsville, and co-sponsored by House Speaker Nathaniel Ledbetter, R-Rainsville, and Ways and Means Education Committee Chairman Danny Garrett, R-Trussville.
SB137 is sponsored by state Sen. Sam Givhan, R-Huntsville.
The nonpartisan Tax Foundation recommends lowering rates across the board rather than targeting a specific income category.
“Ideally, a tax base will be as broad as possible so that rates can be as low as possible and still bring in sufficient revenue,” said Janelle Fritts, a policy analyst at the Tax Foundation. “Whenever a tax base is narrowed, someone is left to pick up the slack. Caring for those with low incomes is a worthy goal, but not one that can be satisfactorily accomplished through the tax code.”
Fritts also said that such a cut might...
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