Committee advances bill limiting occupational taxes as Montgomery City Council passes ordinance

Committee advances bill limiting occupational taxes as Montgomery City Council passes ordinance

By TODD STACY, Alabama Daily News

MONTGOMERY, Ala. – The Senate Governmental Affairs Committee on Tuesday advanced a measure aimed to slow down the process for cities enacting occupational taxes, despite opposition from several of the state’s mayors.

House Bill 147, sponsored by Rep. Chris Sells, R-Greenville, would limit municipalities from enacting occupational taxes by requiring any such policy to pass the Legislature as local legislation. The bill, which passed the House last week, now only lacks passage in the full Senate and signature by Gov. Kay Ivey to become law.

Ivey’s office said she reserves the right to review any bill that comes to her desk, but spokeswoman Gina Maiola added that the governor generally sees occupational taxes as “burdens placed upon hard-working Alabamians.”

“Occupational taxes would not only hurt employees living within those city limits where they are proposed, but also those men and women who commute in from surrounding areas,” Maiola said.

The Republican-led Alabama Legislature has been in something of a race against the City of Montgomery, which has been considering an occupational tax. In the wake of the committee’s action, the Montgomery City Council on Tuesday night voted to pass an ordinance implementing a 1% occupational tax on all those working inside the city limits starting in 2021.

Sells’ bill would not apply to cities that have already enacted occupational taxes. The bill is set to be retroactive to February 1, which could apply to the Montgomery occupational tax effort, though a dispute on which takes precedence is likely to end up in court.

Montgomery Mayor Steven Reed spoke before the Senate committee urging them to shelve the bill and warning that the city would take action to get ahead of the legislation.

“Legislators aren’t involved in the budget process for cities and aren’t held responsible for providing services to city residents,” Reed said.

“We had no intention of instituting an occupational tax,” Reed said. “What we did was have a series of public hearings with our city council just to do some studies. And what we’re asking this committee to do is allow us to continue to study other forms of revenue so that we can serve the citizens of Montgomery. What we would like is to study all options without the state removing the occupational tax option from the table.”

Sells told the committee his bill does not remove the opportunity for cities to enact an occupational tax, but offers non-city residents affected by such taxes to have a voice in the decision by way of their state lawmakers.

“We’re not trying to remove an option,” Sells said. “It would just have to be a local law. That’s how counties have been treated as long as I’ve been here, so the option is still there.”

On Tuesday, mayors from the state’s 10 largest cities, including Auburn, Birmingham, Hoover, Decatur, Huntsville, Madison, Mobile and Tuscaloosa, sent a letter opposing the bill to lawmakers.

“Our opposition to the bill extends beyond a possible ban on new occupational taxes,” the letter said. “We are opposed to the bill’s assault on local governance. No municipal official desires to irresponsibly raise taxes.” 

“As local leaders, we pursue policies and strategies to deliver crucial services, grow our economies and protect residents and visitors alike. We must have the flexibility to exercise our best judgement and uphold our oaths of office.” 

Reed told the committee that if it held off on advancing the bill, the Montgomery City Council could delay a vote on the occupational tax.

The committee approved House Bill 147 by a vote of 8-2, with all Republicans voting for the measure and all the Democrats voting against it.

Voting yes were Sens. Greg Albritton, R-Range, Clyde Chambliss, R-Prattville, Chris Elliott, R-Daphne, Sam Givhan, R-Huntsville, Garlan Gudger, R-Cullman, Jimmy Holley, R-Elba, Dan Roberts, R-Birmingham, Shay Shelnutt, R-Trussville,

Voting no were Sens. Linda Coleman-Madison, D-Birmingham and Malika Sanders-Fortier, D-Selma.