Alabama governor Robert Bentley recently signed into law a bill that would extend the state’s existence income tax deductions for small businesses offering health insurance benefits. The new law will apply to the current tax year and state officials hope that it will drive down the unemployment rate. Small businesses all over the country have had to make cuts to the benefits they offer employees.
Currently, the state’s unemployment rate is at 9.2%. Lawmakers believe that if they can encourage employers to hire more, many of the financial problems the state faces will be solved. The governor insists that the new law will be particularly beneficial to small businesses, many of which have suffered in the wake of a worldwide recession.
These businesses will be eligible for a significant increase in their income tax deductions, bringing the average from 150% to 200%. Employees will also be able to take advantage of the tax deduction if they itemize the taxes accordingly. Officials expect that the law will reduce taxes by nearly $10 million per year.
Many employers claim health insurance as one of their most costly expenses. If business is slow, they have to decide whether to cut benefits or personnel. While many large companies can make do with layoffs, small companies cannot. Health insurance is often the first thing to go in hard economic times. Alabama’s new law seeks to alleviate this, by ensuring employers have more money to keep both staff and benefits.