It is that time of the year when legislators should be thinking about issues which need to be addressed in the next regular session of the Alabama Legislature.

Preparing for a legislative session is much like getting your personal or business budget ready for the next year.

It requires some research and thought, and that is what I have been trying to do over the past few days.

I have mentioned in my recent columns the issues of campaign reform and election reform, and today I want to briefly discuss one aspect of tax reform.

Since the establishment of a federal income tax in 1913 and codification of the Internal Revenue Code in 1939, state and local governments have largely designed their income taxes around the rules and definitions in the federal code.

Conforming to the federal tax code promotes compliance and simplifies tax administration.

There are 41 states in our nation that collect an income tax and five of those including Alabama, do not calculate state income taxes based on a federal starting point.

From that point, which may be adjusted gross income, total taxable income, or federal tax liability, states supply their own personal exemptions, credits, deductions and tax rates.

States may also work backward from the starting point, disallowing federal credits or deductions not permitted under their laws.

Last year, Congress passed a federal tax cut and every state, including Alabama, will feel the effects of the federal tax reduction.

All states will lose revenue from the elimination of the state death tax credit.

Most will lose revenue from the expansion of several education-related deductions.

For instance, the federal tax cut increases the income limit for the student loan interest deduction and repeals the limit on the number of months for which it can be claimed.

This could have an impact on taxable income.

The federal legislation also phases out the overall limit on itemized deductions.

Because itemized deductions are such an important part of determining one’s tax liability, this, in my opinion, should be reviewed very carefully in light of Alabama law.

As you are aware, Alabama allows a state deduction for federal tax payments.

I have heard some discussion about proposals to eliminate this credit.

I strongly support this credit and will oppose any effort to remove this from the Alabama Tax Code.

I mentioned earlier that conforming to the federal code as a &uot;starting point&uot; is what 41 states in the nation do, although Alabama is not one of them.

It may be that we need to make an overall review of our entire state income tax system.

If we used the federal &uot;starting point&uot;, there are basically three approaches.

First, there is the approach of the federal adjusted gross income.

In addition to wages, salaries and tips, adjusted gross income includes other kinds of income such as pensions and annuities, alimony and capital gains.

It also includes several of the so-called above the line deductions that tax payers are not required to itemize on their federal tax return such as interest on student loans, contributions to medical savings accounts and moving expenses.

The second approach is the federal taxable income starting point.

This is derived by applying itemized deductions to adjusted gross income.

Itemize deductions include mortgage interest, state income and property taxes, medical, education and business expenses, legal fees and wagering losses.

A third approach is the federal tax liability starting point.

Federal marginal income tax rates, as well as income calculations, are reflected in this particular method.

Federal tax liability also incorporates a number of elements not included in an income-based starting point such as the alternative minimum tax and credits for the elderly and disabled, child and dependent care, adoption and other education tax credits.

Frankly, this issue is too complex for me, but I thought it should be discussed because tax reform will be a major issue in the next legislative quadrennium.

I have said this before, but I will say it again.

Tax reform should not be about raising taxes.

It should be about fairness and simplifying our tax structure.

It may be that some taxes need to be increased, while others need to be lowered.

I will not support any so-called tax reform measures which strictly are on the table to raise our taxes.

That is not what tax reform is all about.

Until next time, please know that &uot;I’ll go with you or I’ll go for you&uot; to help you solve any problem related to state government.

You can reach me at P O Box 225, Luverne, Alabama 36049 or telephone me at 334-242-7883.

Senator Wendell Mitchell can be reached at 334-242-7883, or by writing to P O Box 225, Luverne, Alabama 36049.