With an expected surplus of $2.7 billion in Alabama's Education Trust Fund (ETF) budget and a small cushion in the General Fund budget, elected officials are weighing options for returning a portion of the excess to taxpayers.
Gov. Kay Ivey proposed one-time income tax rebates of $400 for individuals and $800 for joint filers in her supplemental ETF package. Total cost of the rebates is projected at $966 million. Meanwhile, Lt. Gov. Will Ainsworth and others have proposed rolling back the state's sales tax on groceries.
Sen. Arthur Orr, R-Decatur, and Rep. Danny Garrett, R-Trussville, have introduced legislation to gradually eliminate the state sales tax on food, beginning with a reduction from 4% to 3% in September. HB 250 and SB 177 were introduced Wednesday. The bills have been assigned to the House Way and Means Education Committee and Senate Finance and Taxation Education Committee, chaired by Garrett and Orr, respectively.
One idea gaining momentum is legislation which would lower certain rates on taxable income. Two bills, sponsored by Garrett, unanimously passed the House of Representatives Thursday. Orr is sponsoring companion bills in the Senate.
HB 116 and SB 47 would eliminate the 2% tax rate on the first $500 of taxable income for individuals and the first $1,000 for married persons filing jointly. HB 115 and SB 48 would phase in a reduction of the top tax rate for taxable income over $3,000, from 5% to 4.95% by the 2027 tax year.
Alabama Farmers Federation External Affairs Department Director Brian Hardin praised lawmakers for exploring ways to give back to taxpayers.
"We appreciate our elected officials recognizing this opportunity to reduce the tax burden for Alabamians while conservatively planning for the future to avoid tax increases down the road," Hardin said. "We will continue working with the governor, lieutenant governor and Legislature to ensure taxpayers benefit from this rare budget surplus without creating an additional tax burden in years to come."
Legislation to enact income tax rebates proposed by Ivey also is sponsored by Orr and Garrett, SB 86 and HB 175, respectively.
Other grocery tax-related bills include HB 15 by Rep. Chris England, D-Tuscaloosa, which would allow municipalities to reduce or eliminate the local tax on food.
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