Vote yes on Tuesday to reform state#039;s corporate tax

Published 12:00 am Wednesday, March 29, 2000

There is an election on Tuesday.

If that surprises you, don't be alarmed. There is still enough time for you to arrange to get to your voting place and let your voice be heard. Unlike the recently defeated lottery amendment, this election has not received as much publicity.

No commercials depicting under-the-table business deals in smoke-filled rooms. No deep-pocket campaigns. This election is for voters to decide whether to replace the state corporate shares tax with an increase in the state corporate income tax from five percent to six and one-half percent. Hopefully, this can be explained.

First, why? Alabama's franchise tax was determined unconstitutional last year by the U.S. Supreme Court. That ruling left a $120 million funding void in the state's budget. Obviously, that revenue had to be replaced or we would be faced with the loss of $120 million in state services. The big court's decision was based on the obvious fact that Alabama socked a much higher tax to companies incorporated outside Alabama than to those incorporated in the state.

This is not a new tax. Faced with having to cut services, the Alabama legislature had to come up with a way to recoup the lost tax. They revised the corporate shares tax and created the business privilege tax as a short-term "bridge" taxes.

The proposed increase in corporate income tax would replace those taxes. It is a revenue-neutral tax swap, according to Bruce Ely, an attorney with Tanner and Guin, LLC, in Tuscaloosa. Ely is the attorney for the Business Associations Tax Coalition, which made the recommendation for replacing the revenue lost when the franchise tax was ruled unfair.

The coalition was asked last year by Gov. Don Siegelman to study the options and come up with a proposal for filling the tax gap. The coalition has representatives from 33 Alabama trade and business associations.

This tax is fair. Unlike the corporate shares tax which taxes corporations on their net worth, the income-tax increase will tax business profits. This keeps an established company with lots of assets but no profits from having to sell off assets to pay the tax. It is only fair that the tax burden be heaviest on those most able to pay.

This tax does not affect individuals and small businesses that are not incorporated.

This tax is simpler. While most folks who vote in Butler County and Alabama on Tuesday will never have to complete a corporate tax return, there is benefit in the new tax for those who are directly affected. The coalition determined businesses wanted something less complicated. It also will mean less forms of taxes for corporations to calculate and pay.

Even with the change, Alabama's business taxes will be among the lowest in the nation, but with less complication. Help your employer, help your business and help your state by voting "Yes" on Tuesday, March 21, for the Constitutional Amendment to revamp the corporate income tax and abolish the corporate shares and business privilege tax.

Eric Bishop is publisher of the Greenville Advocate. His column appears on Saturday.