Tax reform or tax increase?
Published 12:00 am Wednesday, August 8, 2001
For many years, we have read attacks on Alabama’s tax structure. It has intensified in the past three years, beginning early in Gov. Siegelman’s administration with the court’s ruling on the franchise tax problem. Almost daily, editorial pages across the state proclaim that more money will solve the problems in state government.
We are told we should be embarrassed about how low property taxes are and how schools are under funded. I have listened to the rhetoric and tried to filter through the words to determine what is true or false. My grandmother used to tell me as a young boy growing up on the farm to &uot;be careful what you listen to because it will form what you believe, and if you hear something long enough you will soon believe it.&uot;
I, like most of you, care about public education. My youngest child has just finished public school in Montgomery County where my wife has dedicated 23 years to the field of special education. After much study on the issue, I sincerely believe that all the facts have not been forthcoming. What also concerns me is that all this may be done by design in order to set the stage for a massive tax increase on the people of Alabama. I think it is past time for the full story to be told. I want to share with you some of the facts that the editorial writers and the policymakers are not sharing with you.
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The citizens of Alabama collectively pay more tax dollars into state government as a percentage of income than every state in the Southeast except one. Based upon a study by the American Legislative Exchange Council, the nation’s largest bipartisan organization of state legislators, Alabama ranks 34th in the nation on state taxes paid in relation to our ability to pay. We rank above Georgia, 35th; Louisiana, 38th; Florida, 43rd, and Tennessee, 45th. Even Illinois, with metropolitan Chicago, ranks below Alabama, at 44th. Only Mississippi ranks higher, being 11th in the nation.
From 1990 to 1999, taxes paid by Alabama citizens increased by 11.2 percent while the national average increased by 8.5 percent, according to the Legislative Exchange Council study. Before government can expect more money, citizens should expect greater efficiency and accountability of existing tax dollars.
Property tax revenues are increasing dramatically. Property taxes collected in Alabama in 1999 totaled $151 million more than 1998. Increases each year for the last nine years totaled $660 million, an average of $73 million per year, a 94 percent increase. Alabamians now pay $1.37 billion in annual property taxes.
Property taxes began in colonial times during the 18th century. During this period, property was about the only economic indicator of wealth. Policymakers have ignored the fact that this is no longer true.
The Education Trust Fund (ETF) increased 5.19 percent in 2000 to a whopping $4.11 billion while expenditures increased 5.22 percent. Proration does not mean that you have less revenue than the year before. It means government has irresponsibly obligated more money than it has taken in.
Alabama’s constitution rightfully prohibits the state from going into debt. The House of Representatives passed a proration prevention fund but it died in the Senate this year. Why would politicians and the education union be opposed to starting a savings account for the trust fund and our general fund budget? Could it be to create a crisis in order to create a need for more taxes?
In the last decade, there was never less money taken in than was received in the previous year. Politicians, however, have spent more than the revenue collected, resulting in chaos and disunity among education leaders as happened this year.
There is a solution to end education proration forever. Legislation introduced this year would require budgeting to be done based on the prior year's receipts. Unfortunately, many legislators yielded to pressure from the education labor union, and the bill never came up. Our organization along with all major business groups supported this bill. We support a proration prevention fund, budgeting based on prior year’s actual receipts, and granting local schools more flexibility in spending decisions and a reduction in state mandates.
Current use taxation of agricultural land is fair and nondiscriminatory. There is a continuous barrage of misinformation on this subject that tries to convince you that landowners who have a farm or forest land are getting preferential treatment. Current use is very simple. Other property always has been taxed at its current use. A mall always has been taxed as a mall; a home has been taxed as a home; an automobile as an automobile. When current use was approved several years ago, it means that farmland and forest land are now taxed as farmland and forest land. Before we had this law, many landowners were forced to sell their farm or forestland to developers because they could not afford to pay taxes based on speculative value.
Current use of agriculture land is good for all the citizens of Alabama because it allows a person to keep that land in production of agricultural produce and green space. This has positive effects on our environment and the economy of Alabama. All 50 states acknowledge agriculture and forests through a differential in tax assessment. There is a growing concern over the loss of green space and farmland due to urbanization throughout rural America. It is good public policy to support farmers.
Let’s challenge those who feel we need to increase taxes in Alabama to devote as much energy in finding ways to increase the average per capita income of $21,000 to a more substantial level. According to the latest census, there seem to be two Alabamas — those around the urban areas who are doing better financially, and then there is rural Alabama.
The Alabama where I came from seems to have been left out of most economic development. Let’s challenge our church leaders, our educators and yes, even our editorial writers, to work as hard at increasing the income of our citizens as they have worked for constitution revision and tax reform. As my grandmother used to say, &uot;It’s hard to get blood out of a turnip.&uot; As the income levels increase for our people, then our net taxes will increase. The challenge is for all groups who have jumped on the bandwagon of more taxes to ride the wagon of economic prosperity so that it reaches all of our citizens, rural and urban alike.