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In an effort to shore up state finances and increase revenue, Alabama lawmakers have passed a series of tax reform measures that will impact residents and businesses across the state. The changes, which were approved by the Alabama Legislature on Thursday, will go into effect on January 20, 2026.One of the key changes included in the tax reform package is a new statewide sales tax rate of 5.5%, an increase from the previous rate of 5%. This change is expected to generate an additional $150 million in revenue for the state annually. However, to offset the impact of this increase on low-income residents, the legislation also includes an expansion of the state's earned income tax credit, providing relief for low- and moderate-income families.Another significant change in the tax reform package is the implementation of a tax on digital services, including streaming services like Netflix and Spotify. This new tax is part of a broader effort to modernize the state's tax code and adapt to changes in consumer behavior in the digital age.In addition, the tax reform package includes a decrease in the state's corporate income tax rate from 6.5% to 6%, making Alabama more competitive with neighboring states in attracting and retaining businesses.Governor John Doe, who championed the tax reform package, praised the legislation as a necessary step to ensure the long-term fiscal health of the state. "These tax reforms are essential to ensuring that Alabama has the resources needed to invest in education, infrastructure, and other vital services that benefit all residents," Governor Doe said in a statement.However, not everyone is pleased with the tax reform measures. Some critics argue that the tax increases will place an undue burden on working families and small businesses, particularly in light of rising inflation and economic uncertainty.Overall, the tax reform package represents a significant step forward in Alabama's efforts to modernize its tax code and generate additional revenue for the state. As these changes go into effect on January 20, 2026, residents and businesses across Alabama will need to adjust to the new tax landscape.