MONTGOMERY, Ala. (WIAT) -- As an hourly employee, your overtime hours are free of state income tax. This is because of a law passed in 2023 by Rep. Anthony Daniels (D-Huntsville).
That law is set to expire next June and one state senator said renewing it could come with a price tag.
"The only question becomes 'does the legislature want to continue this or not' given the financial impact to the education budget?" said Sen. Arthur Orr (R-Decatur). Sen. Orr chairs the education budget committee. He said that impact has come at a cost of $230 million.
Sen. Orr explained this is money that would have gone to the education budget in the form of 5% tax on overtime. With a tight budget next year, Orr said lawmakers may have to consider making changes- like bringing back that five percent tax on overtime hours.
"When you lose revenue, in Alabama we're not like the federal government that can cut taxes and raise spending, and just whistle on down the road as they do on a regular basis," said Orr. "We have to balance our budget."
But Rep. Daniels disagrees. He explained the state has added 43,000 new employees since the law went into effect. Rep. Daniels said the revenue made from spending exceeds what the overtime tax would have brought in by itself.
"So, you're telling me we're going to go and take money from hard working Alabamians?" said Daniels. "The individuals that are responsible for the growth of the Education Trust Fund. If they're not working, there's no money going to the budget. You're getting five percent of their first forty hours. Now, you want five percent of time and a half?"
Rep. Daniels said we should incentivize people to work. "The costs have gone up, but the wages have stayed the same. So for me, a way to solve the problem so employers and employees are happy, is removing their wages on overtime," remarked Daniels.
Sen. Orr said the legislature will have to decide. "Do we let it lapse, or do we come with something new, or do we put a cap on it this time?" said Sen. Orr. "All are options. And we'll just have to see what the numbers look like in February when we begin our 2025 regular legislative session."
Rep. Daniels said there are more jobs available in the state of Alabama than there are people on unemployment. He said companies need help with productivity.