Alabama Eyes Tax Cuts

Alabama Eyes Tax Cuts

( – Alabama has a budget surplus, and lawmaking committees approved two bills on April 5 that would give some of that back to taxpayers.

Both proposals would have modest but noticeable effects for taxpayers. The first would eliminate a 2% tax Alabama residents pay on income. Under current law, single residents pay the tax on the first $500 of taxable income. Married residents pay that tax on the first $1,000 of taxable income.

The second bill would reduce the current state income tax rate in steps. Alabama has a 5% tax that has to be paid on taxable income above $3,000 for single people and above $6,000 for married couples. If this bill passes, that rate would inch down slightly to 4.95% in 2027.

Both bills got the approval of the state House Ways and Means Education Committee; now, the full House will consider them.

Committee chair Danny Garrett, who also sponsored the bill, acknowledged that the tax cuts are small, but said, “they are steps.” He noted that taxes have been going down slightly for several years as past legislatures have made similar moves. When you add this all up, Garrett says, “It’s pretty substantial.”

Democratic state Rep. Curtis Travis supports the bills, saying they’d help Alabama families.

There may be more cuts in store given the state’s surplus. Up for debate is the state’s 4% tax on food; Alabama is one of only a handful of states that tax groceries. Removing that tax has been talked about in the capital for years, but the needs of the state’s education budget have derailed that in the past.

Eliminating the grocery tax would cost the state budget $600 million annually.

On the Senate side, Arthur Orr, chair of the Senate Finance and Taxation Education budget committee, wants to eliminate the state tax on some food, but not all. He wants to cut the tax on milk, eggs, baby formula, vegetables, fruit, and whole-grain bread.

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