When Congress passed the Tax Cuts and Jobs Act in 2017, it had the unintended consequence of raising taxes on Alabamians. The reason: In Alabama, one can deduct federal income tax on their state tax return.
Given the federal income tax burden was reduced for corporations and individuals, it led to a reduction of what can be deducted on a state tax return, which effectively caused state taxes to increase. As the COVID-19 pandemic wreaks havoc on Alabama’s economy, State Sen. Dan Roberts (R-Mountain Brook) says now is the time to consider a correction for that unintended consequence of the federal tax cuts.
During an interview with “The Jeff Poor Show” on Huntsville radio’s WVNN, Roberts offered his fix, which he and State Rep. Danny Garrett (R-Trussville) unveiled earlier this year.
“We filed a bill — Rep. Danny Garrett and I co-chaired a joint task force looking at the impact of the federal 2017 Tax Cuts and Jobs Act,” Roberts said. “That was about a nine-month study, working with some of the top people in our state — with universities, Society of CPAs, tax leadership groups. And we came up with a plan that would do for Alabama what the federal Tax Cuts and Jobs Act did for the United States. We put that together, filed that report, and did the accompanying legislation.”
“That would involve a lowering of the corporate tax rate and an elimination of the federal income tax, but at a rate that’s lower than what their effective rates are today,” he added.
According to the Jefferson County Republican lawmaker, the current state tax law puts Alabama at a competitive disadvantage with its neighbors.
“[A]nyone can pull up a heat map that shows where corporate rates are in Alabama, and we stick out like a sore thumb,” Roberts said. “Only two states in our union allow the deduction of federal income tax, and that’s Louisiana and us. That results in us posting a six-and-a-half percent rate. Just across the state line, you’ve got Georgia probably going to five-and-a-quarter [percent]. Florida is in the 4% range. Tennessee is lower. So we’re not competitive … that’s why they choose not to [come here].”
Read the report of the Joint Legislative Task Force on the Tax Cuts and Jobs Act
Read the proposed Alabama Business Tax Competitiveness Act (SB250)
@Jeff_Poor is a graduate of Auburn University and the University of South Alabama, the editor of Breitbart TV, a columnist for Mobile’s Lagniappe Weekly and host of Huntsville’s “The Jeff Poor Show” from 2-5 p.m. on WVNN.
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