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House bill passes to eliminate income tax on overtime pay

The bill would save employees 5 percent on overtime pay accumulated over the course of the year.

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The Alabama House of Representatives voted unanimously in favor of a bill Tuesday that would eliminate state income tax on overtime hours.

House Minority Leader Anthony Daniels, D-Huntsville, said the bill would focus on participation rate in the state’s workforce.

“I will tell you that I heard from one of our employers in Mobile last evening talking about how this piece of legislation will be able to save some of the employees going over to Mississippi to work,” Daniels said. “I think this gives us another feather in our cap as a recruitment tool for the Department of Commerce.”

The bill is estimated to cost $45 million in revenue to the Education Trust Fund. An amendment was added to make the provision sunset after three years so that the Legislature can look back at the impact of the law and decide whether to extend it.

And Daniels said the hope is that much of the money lost directly from the ETF returns through the sales tax boost that employees will receive from keeping more of their overtime earnings.

“This bill I think is really unique,” said Rep. Danny Garrett, R-Trussville. “It’s the first one we’ve seen like this in the country. it’s an incentive to get our labor force participation up. It’s a great bill. I applaud you for thinking out of the box.”

The bill passed 105-0 and moves to the Senate.

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Jacob Holmes is a reporter at the Alabama Political Reporter. You can reach him at [email protected]

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