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Alabama House approves small business tax credit for new jobs

The Alabama House of Representatives today passed a bill that would give businesses with 75 or fewer employees a $1,500 income tax credit for every new, full-time job paying $40,000 or more a year.

The bill, by Rep. Kyle South, R-Fayette, is called the Alabama Small Business Jobs Act and is one of the bills in the House Republican Caucus agenda.

It passed by a vote of 88-12. It goes to the Senate.

The Legislature passed a similar bill five years ago, the Full Employment Act of 2011. It allows businesses with 50 or fewer employees to receive a $1,000 tax credit for new jobs paying at least $10 an hour.

Businesses received an average of 279 tax credits a year from 2012 to 2014 under the Full Employment Act, according to the Legislative Fiscal Office.

If South’s bill passes, businesses could not claim credits under both laws.

To qualify for a credit under South’s bill, businesses would have to show a net increase in the number of employees.

The credit could not reduce income tax liability below zero, but unused portions could be carried forward for up to three years.

In a statement, South said state incentives for business and industry usually benefit large employers, but small businesses play a huge role in job creation and economic vitality.

Rep. Patricia Todd, D-Birmingham, voted against the bill.

“We constantly are draining our state budget to pay for tax credits over and over again,” Todd said.

Income tax revenues go to the Education Trust Fund. The Legislative Fiscal Office estimated maximum annual tax credits claimed under South’s bill would be $418,500.

South said the income taxes paid by new employees offset the state revenue lost because of the credits.

Todd said that’s the typical argument in favor of tax incentives, but she said there’s no reporting to verify that it’s actually the case.

February 10, 2016

Mike Cason | By Mike Cason |

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