South Birmingham Times

The Alabama Policy Institute (API) is calling on state legislators to preserve a tax cut for employees working overtime. This request comes as part of API's 2025 BluePrint for Alabama, which is a detailed 30-point plan aimed at fostering free markets, limited government, and strong families in the state during the upcoming legislative session.

One key element of this agenda is the continuation of the elimination of taxes on overtime work. Stephanie Smith, CEO of API, discussed this topic on WVNN’s “The Yaffee Program.” She emphasized the importance of not taxing individuals who work extra hours to support their families. Smith stated, "the idea is, when people are trying to provide for their family working extra time, why would we tax them? Why would the state tax them for that work at a higher rate?"

In 2023, House Bill 217 was passed, removing state income tax obligations for full-time hourly wage employees working over 40 hours per week. However, this tax break will expire on June 30, 2025 unless lawmakers decide to extend it.

Smith explained that those earning through overtime typically reinvest their earnings into the economy by spending at local businesses or saving in retirement accounts. She noted that these expenditures help circulate money back into the economy.

Despite concerns about revenue shortfalls impacting Alabama's Education Trust Fund (ETF), with costs rising from an expected $35 million to $230 million due to the exemption, Smith argues against reinstating taxes. She believes this financial impact reflects funds returning to the economy rather than being withheld due to non-working conditions.

"That’s $230 million into back into the economy," Smith said. "And when you sunset a tax cut, that’s rating taxes."