Alabama families are set to pay an extra $87.7 million in state income taxes due to the federal government’s expansion of tax credits included in COVID-19 pandemic relief.
Pandemic relief legislation passed last year by Congress expanded the dependent care, earned income and child tax credits. Income from work must have been earned by the taxpayer to qualify for the earned income and dependent care tax credits.
Current Alabama law does not exclude the pandemic-era federal tax benefits from being taxed by the state. However, efforts are underway in the Alabama Senate to prevent the tax hike from going into effect.
State Sen. Dan Roberts (R-Mountain Brook) is leading legislative efforts to shield families from being penalized for benefitting from the tax credits.
In announcing his intent to file the bill, Roberts suggested that the legislature needed to act swiftly to provide relief to Alabama families.
“If we do not pass this bill, then we are choosing to impose an extra $87.7 million in taxes on hardworking Alabamians who qualified for tax relief because they showed up for work during the pandemic while some others walked off the job to collect higher unemployment benefits,” stated Roberts. “I don’t think that’s fair to our nurses, ambulance drivers, police officers, and so many others who stayed on the job during these tough times.”
Roberts plans to reintroduce his bill in the Senate on Tuesday when the legislature returns to regular session. The legislation would solidify an exclusion into state law shielding families from paying additional taxes on the credits they received last year.
A similar legislative effort led by Roberts was signed into law by Gov. Kay Ivey in early 2021 which barred the state from taxing COVID-19 relief stimulus funds.
Roberts concluded, “This money belongs to the people, not the state government. With tax filing season already upon us, the legislature must act quickly to protect working families from this looming tax hike. Doing otherwise would be unconscionable.”
The bill, which is expected to earn a hearing from the Senate Committee on Finance and Taxation General Fund, has gained bipartisan support and is cosponsored by 29 of Roberts’ colleagues in the upper chamber.
Dylan Smith is a staff writer for Yellowhammer News. You can follow him on Twitter @DylanSmithAL
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