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Un-tax overtime income? Lawmakers like the idea

If you work more than 40 hours a week in Alabama, your overtime paycheck might look a lot healthier if a new proposal is signed into law.

The Alabama House Ways & Means Education Committee moved forward a bill Tuesday that would un-tax work performed in excess of 40 hours in any week from being included in the calculation of gross income.

“If you work a 40-hour shift, you work 10 hours overtime — those 10 hours the state charges 5% income tax on would be exempt,” said Rep. Anthony Daniels (D-Huntsville). He presented the idea to the committee which was enthusiastically received.

“This is one of the more intriguing proposals that has come before us in a while. All of us are scratching our heads and asking ‘who else is doing this?’ — and the answer is no one,” said Committee Chairman and co-sponsor Danny Garrett (R-Trussville). “This would be a first for Alabama.”

No other states exempt overtime income from taxes.

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Overtime is calculated at a minimum time and-a-half the regular rate of pay. Daniels said those who are working hardest will keep that money in their pockets.

“This encourages the workforce participation rate but also provides an incentive for existing experienced and trained workforce to work additional hours and be able to take home more,” he said. 

The committee-approved bill moves forward to a full vote in the House before heading to the Senate. House Speaker Nathaniel Ledbetter is signed onto the bill along with an impressive bipartisan bench. 

“It’s rare when the Speaker co-sponsors a bill with the Minority Leader,” Ledbetter said. “But Leader Daniels bill to eliminate the overtime tax is what Alabama needs to spur more job growth.”

Grayson Everett is a staff writer for Yellowhammer News. You can follow him on Twitter @Grayson270 for coverage of the 2023 legislative session. 

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