Education the topic for special session
Published 12:00 am Wednesday, December 12, 2001
Gov. Don Siegelman's plan to raise taxes to offset proration in education funding went nowhere during the first three days of our current legislative special session.
The education finance committees from both the House and Senate have been meeting jointly to take testimony on the seven bill package proposed by the governor. At the heart of this package are proposals to increase corporate income taxes and impose privilege license taxes on corporations. It is estimated that, if passed, the additional income would be $160 million, all earmarked for education funding.
The public hearings have produced a number of people who testified against the tax package, particularly the business privilege tax. Those who stated opposition to this particular tax, which is based on net worth, did so because they said it would affect companies that are not making any profits.
Email newsletter signup
An example was given where a company invested $2 million to purchase land and equipment to be used to generate a particular product. Under a normal business plan, it would take three years to get the company up and running and expect to realize a profit. Under Gov. Siegelman's proposal, this corporation would be taxed on its $2 million "net worth" from the beginning, even in a period when it stood no chance to make a profit. The finance director responded to this example by stating that if a person owns a house and puts $100,000 to improvements in that house that the ad valorem taxes would be based on the full value of the house, including the improvements.
I am not certain that these arguments are parallel. They are viewed by some as "apples and oranges." In any event, opposition to the privilege tax bill was strong enough that the committee did not vote on any measure, although it appears that at least two of the bills are nearing a consensus.
One of those bills on which agreement appears to have been reached is legislation to close a corporate tax loophole where companies do make profits in Alabama but do not pay taxes in our state. The loophole is a provision in existing law which has been interpreted to allow companies to transfer assets out of state, significantly altering their balance sheet, and therefore their profit. I favor doing something about this problem.
A new proposal has come forth this past weekend during compromise discussions. This proposal would use the state's oil and gas royalties to offset proration. I personally feel this is a good idea for an immediate "fix" to this problem, and it does not adversely affect any other state program.
Because these are revenue raising bills, under the Alabama Constitution, each of them must first be considered by the Alabama House of Representatives. Therefore, I will not have an opportunity to view the final proposals until they are passed by the House. If the House does not act this week, then I have some concern that the whole program may fail.
I am committed to finding the funds to stop the cuts in our education programs and I, at least at this stage of the game, feel somewhat confident that this will be accomplished. I will continue to use my column to keep you informed on the status of this important matter which is the subject of the special session of the Alabama Legislature.
While we are in session, you can reach me by telephone at 334-242-7883, or by mail at room 735, Alabama State House, 11 South Union Street, Montgomery, Alabama 36130. And remember, "I'll go with you or I'll go for you" to help you solve any problem related to state government.