Jefferson County Occupational Tax
The Jefferson County Occupational Tax is a 0.5% tax on wages for most workers in Jefferson County. It was created by the county to fund construction of the Jefferson County Jail in Birmingham and took effect on January 1, 1988. The levy was enabled by a 1967 law passed by the Alabama State Legislature giving the county the power to impose taxes on wages and business licenses. Currently it is the third-largest source of revenue for the county, raising approximately $67 million per year.
From its inception, the law was criticized for excluding professionals who already paid a licensing fee. Ten lawsuits have been filed challenging the legality of the tax. On November 12, 1998 Circuit Court Judge John Rochester ruled that the tax was unconstitutionally unfair and ordered a revision to include all workers. The county prepared a version removing the exemptions to tax all workers at the same rate. Meanwhile the state legislature argued that the rate should be adjusted to keep overall revenues flat.
In 1999 the legislature rejected the County's proposal and passed a law sponsored by Arthur Payne of Trussville which earmarked $29 million from the tax for 144 special projects chosen by legislators. The county challenged the new tax in court, so In special session that November the legislature repealed the 1967 enabling law, giving it the sole power to determine a replacement revenue source. The case against the first rewrite was won by the county in January 2000.
In March 2000 a second rewrite was passed in the legislature, now containing $31 million for legislator's programs and funds requested by Don Siegelman for state offices in the county. The Jefferson County Commission refused to collect the new tax while its legal challenge to the repeal proceeded. That same month the repeal was judged unconstitutional in Circuit Court. The second rewrite was also found to be unconstitutional in September 2000. By the end of 2001 the original occupational tax seemed to be safe.
However, in May 2005 an unrelated case regarding the means by which a law can struck down was decided by the Alabama Supreme Court, threatening the status of the Circuit Court ruling against the first legislative rewrite. Another lawsuit against the occupational tax was subsequently filed, arguing that funds collected after the April 1, 2000 repeal should be refunded to workers.
Uncertainty about the County's ability to collect the tax, and the threat of having to refund previously-collected funds have been at the forefront of the fiscal policies of County Commission, especially following the 2006 general election when a Republican majority was installed and Bettye Fine Collins assumed the presidency. The county has withdrawn pledges of financial support for a domed stadium and negotiated smaller contributions than were pledged to other projects, such as the Red Mountain Park.