Two Republican lawmakers are leading efforts in the Alabama Legislature to reduce the tax burden levied upon retirees and low-income earners.
Two bills were introduced by State Sen. Arthur Orr (R-Decatur) and State Rep. Lynn Greer (R-Rogersville) which would cut taxes for fixed income and low-income taxpayers, which are two groups of individuals that are among the most severely impacted from the recent inflation spike.
According to a release, distributions from defined contribution deferred compensation plans are currently treated as taxable income for state income tax purposes.
As proposed, Senate Bill 18 would make up to $10,000 in distributions exempt from income tax for individuals 65 years of age or older. If enacted, the exemption would be implemented over a two-year period.
The second piece of legislation, Senate Bill 19, would increase the optional standard deduction for married couples filing jointly by $1,000. The optional standard deduction for single filers, married individuals filing separately, and head of household filers would increase by $500.
The adjusted gross income range allowable for the maximum optional standard deduction would increase from $33,000 to $35,000. Additionally, the adjusted gross income range allowable for dependent exemption would increase from $20,000 to $50,000, increasing the threshold at which the state imposes individual income taxes.
Orr advised that funds received from the federal government to assist in the mitigation of economic damage caused by the COVID-19 pandemic as well as the state’s fiscal practices have paved the way for the tax cuts to be introduced.
“As a result of the large amount of federal COVID-relief dollars being injected into Alabama and the conservative budgeting approach the legislature has taken over the years, we find ourselves in a prime position to be able to deliver tax cuts to the people back home in our districts – particularly retirees and low-income individuals,” stated Orr.
“I have been working for some time on these proposals to provide tax cuts to the thousands of Alabamians who really need this relief,” he added. “The necessity for these cuts is particularly important given our nation’s current out of control inflationary environment – where many with fixed incomes are seeing prices on everyday items skyrocket.”
The senator thanked his colleagues for their support of the tax reform measures.
He concluded, “The fact is that there are many Alabamians who could greatly benefit from these tax breaks, and we are in a position as a state where we can supply them. I appreciate the broad support that I have already received from my colleagues on this legislation, and I look forward to taking up these bills in the legislative session.”
The bills have been cosponsored by the following senators:
- Senate President Pro Tem Greg Reed (R-Jasper)
- Senate Majority Leader Clay Scofield (R-Guntersville)
- State Sen. Tom Butler (R-Madison)
- State Sen. Gerald Allen (R-Tuscaloosa)
- State Sen. Tim Melson (R-Florence)
- State Sen. Andrew Jones (R-Cherokee)
- State Sen. Jack Williams (R-Mobile)
- State Sen. Sam Givhan (R-Huntsville)
- State Sen. Jabo Waggoner (R-Vestavia)
- State Sen. Tom Whatley (R-Auburn)
- State Sen. Will Barfoot (R-Pike Road)
- State Sen. Clyde Chambliss (R-Prattville)
- State Sen. Chris Elliott (R-Daphne)
- State Sen. Steve Livingston (R-Scottsboro)
Greer, who is spearheading efforts to pass the bills in the legislature’s lower chamber, touched on the need to make Alabama’s tax environment more competitive with that of surrounding states.
“Tax reform on defined contribution plans has been a priority and strong focus of mine for years, and we are now positioned to deliver,” he proclaimed. “All our contiguous states offer a better deal than Alabama to retirees when it comes to defined contribution plan taxation.”
Greer expressed gratitude to Orr for presenting the tax reform legislation and stated his intentions to ensure the bills successfully pass the legislature.
“It is important that we take advantage of the strong budgetary position our state currently finds itself in and use it to do something that will greatly benefit thousands of Alabamians across our state,” Greer added. “My constituents expect that, and I am ready to work hard on moving these bills through the legislature so I can give them this relief. I appreciate Senator Orr’s leadership in recognizing the need for these bills, and I am excited to partner with him in bringing much-needed help to Alabama taxpayers.”
Dylan Smith is a staff writer for Yellowhammer News. You can follow him on Twitter @DylanSmithAL
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