MONTGOMERY, Ala. (WHNT) — Alabama lawmakers are calling for an end to the state’s tax on overtime pay for all hourly workers in the state.
Those supporting the bill said it’s good for both worker productivity and employers trying to hire and retain staff. HB217 would exempt overtime hours from state income taxes, allowing employees to take home an extra 5% of their pay.
“This proposal rewards hard work,” House Minority Leader Anthony Daniels (D-Madison) said.
Daniels is sponsoring the bill. He said it’s basically a raise for workers, and he hopes it helps the state’s labor force participation.
“It gives individuals that work overtime the opportunity to make more money without their employer having to do an increase in wages,” Daniels said.
The proposal has bipartisan support, with House Speaker Nathaniel Ledbetter signed on as a co-sponsor.
“The firefighters don’t quit because the clock strikes 4:00 it’s time to go home. They quit when the job is done,” Ledbetter said. “It doesn’t matter if you’re a utility worker, if you’re out in a storm or tornado or hurricane. The worst weather God has to offer is when they’re working. This would give them the opportunity to keep those wages in their pocket.”
The bill has already passed the House but underwent changes in the Senate Education Budget committee Wednesday.
An amendment passed that sets a $2,000 cap to the amount of overtime an employee can earn before they will be taxed, in efforts to lessen the hit to the Education Budget from an estimated $45 million to $21 million.
Sen. Bobby Singleton spoke against the amendment, saying the cap guts the bill, but it ultimately passed committee, 13-0.
If the bill becomes law, it will sunset in 2026.
The final legislative hurdle will be a vote in the Senate. After Wednesday, lawmakers will have two days left in the session to pass bills.