04/25/2008
State
Senate could act on tax increase
The Alabama House of Representatives passed legislation last week to eliminate the state 4 percent sales tax on food. The bill slipped through by the minimum number of votes required, including those of two members who were on a trip to Korea at the time the vote was taken. The exemption does not eliminate city and county sales tax taxes on food, which combined are often more than 4 percent. The legislation does not prevent cities or counties from raising their rates nor is there a cap on the rates that cities or counties can charge. The exemption only covers food that can be purchased with food stamps and other items are not covered exempt.
To recoup the loss of approximately $350 million in revenue resulting from the food tax repeal, the bill also eliminates the deduction from personal state income tax of federal income tax payments.
This legislation is popular in the media and with legislators. The Legislature has only six meeting days left. If the Senate is able to either pass or defeat the gambling legislation that has been filibustered for the past 12 legislative days, it is very likely a vote will be taken on this legislation.
Corporate tax is not impacted by this legislation, but small businesses that are Sub Chapter S and LLCs would be impacted by this legislation.
To calculate the impact on you, simply determine the amount of federal income tax you paid last year and multiply it by 5 percent, or review your tax return that was filed on April 15. Please call your senator at 334-242-7800 and ask them to vote NO on this tax increase (House Bill 274).
Alabama House continues to debate $82 million tax increase
This week, pro-business forces held off a vote on an almost $100 million retroactive tax on Alabama's employers. The legislation on the table involves changes to Alabama's add-back statute, but the real issue is the Legislature's refusal to budget within the state's means. Between 2003 and 2007, the education budget grew by $2.5 billion. Education spending in 2007 reached a record total of $6.7 billion; an amount that lawmakers knew could not be maintained. Alabama businesses paid $6.2 billion in state and local taxes in 2007 and now they want you to pay more.
HB 350 in its current form is retroactive, would lead to possible further litigation and would harm economic development efforts.
The bill that was debated on the House floor on Thursday would link HB 350 to a now significantly watered-down version of the much-needed small business and employee tax credits for health insurance coverage. The original health insurance legislation would have allowed businesses with fewer than 25 employees to deduct 200 percent of the amount they pay for employees' health insurance from their state income tax, while employees making up to $50,000 annually could deduct 200 percent of the amount they paid towards their health insurance premiums from their individual income tax.
The House committee amendment reduces those deductions to 120 percent. According to the filibuster debate, the reworked version would increase the deduction in two, 15 percent increments to 150 percent by the year 2014, if the education budget has grown by 6 percent at certain checkpoints. So, six years from now, the deductions might reach 75 percent of the original proposal.
That kind of "what-if," six-years-down-the-road "tax relief" will do little to help small businesses and their employees afford healthcare coverage.
Punitive immigration legislation to receive House vote next week
The House will consider HB 664 by Rep. Randy Hinshaw (Huntsville) next week. This legislation threatens business owners by mandating that the Alabama Department of Revenue revoke the business licenses of companies found to have knowingly hired illegal immigrants. This legislation requires:
- The Department of Revenue to become the immigration police, even though the department is not trained in federal immigration or employment law
- Requires Revenue to hire an additional 1,000 employees
- Allows Revenue to conduct an investigation anytime it has a "reason to believe" that a violation has occurred but fails to require that the belief must be "reasonable"
- Fails to define the type of investigation Revenue must conduct
- Requires an employer to provide "all employment records" to Revenue
- Fails to provide safe harbor exempting a contractor for responsibility of its subcontractor's hiring practices
- Is preempted by federal law
- Could create a new cause of action for employers
Internet filing of new hires to be mandatory
Effective May 1, 2008, Alabama employers with five or more employees will be required to report all newly-hired, rehired, and recalled workers electronically to the Department of Industrial Relations. The purpose of the Alabama New-Hire program is to reduce fraud in public compensation and support programs and to help locate parents who may be delinquent in legal child support obligations.
Information and instructions for Alabama New-Hire reporting are available at: dir.alabama.gov/nh. In addition, answers to questions are available by calling 334-353-0408.
Federal
Second congressional district forums
Candidates from both parties participated in a candidate forum earlier this week on Troy University's main campus. It was one of three forums sponsored by NFIB, AARP, Troy University and WSFA, Channel 12, in Montgomery. The two-hour forum featured questions from a three person panel including NFIB/Alabama State Director Rosemary Elebash and questions from the audience. Healthcare, permanent repeal of the federal death tax, foreign policy questions were some of the topics discussed. The last forum will be held on Tuesday, April 29 beginning at 10 a.m. on the Troy University campus in Dothan. Everyone is invited to attend.
NFIB member inducted in Hall of Fame
NFIB member Chuck Edwards owner of Edwards Plumbing, Heating and Air Conditioning, Inc. in Montgomery was inducted into the Robert E. Lee High School Hall of Fame earlier this month. He is the owner and president of the company he founded 43 years ago. He has built the firm into a business with more than 90 employees, and the firm is one of the largest and most successful plumbing, heating and air conditioning businesses in central Alabama. He is active in many community boards and he also co-founded the Montgomery School-to-Career Program. He has been a volunteer speaker in Montgomery Public Schools for Partners in Education and is a past president of Montgomery Job Corp Industry Council. Congratulations, Chuck!
If you have any questions, please contact the Montgomery office at 334-264-2261.
Sincerely,
Rosemary Elebash
NFIB/Alabama State Director
Rosemary.Elebash@NFIB.org
