What is with Alabama Republicans?
Yesterday, the Alabama House of Representatives passed a major tax reform bill that's expected to reduce the state tax burden on 80% of Alabama taxpayers. It's a step towards bringing Alabama's horribly regressive tax system into balance.
Specifically, the bill is a proposed constitutional amendment that eliminates the sales tax on food, increases the standard deduction, and raises the personal exemption for low and middle-class taxpayers.
It's long overdue: the personal and dependent exemption amount haven't changed since 1935! Ok, that was well before I was born, but I'm pretty sure that the cost of living has increased substantially since then. It's amazing that the deduction is still $1500/person and $300/child.
Most Democrats were pleased that the bill passed:
Rep. John Knight, D-Montgomery, the plan's sponsor, estimated that 80 percent of Alabama households would save money or break even under the plan, while 20 percent would pay more in taxes.
“It's a great day for working families in this state,” Knight told House members after the vote.
The bill passed passed 63-38. A squeaker! As a constitutional amendment, it needed a minimum of 63 votes. Note that Rep. Laura Hall, from Huntsville, was present but didn't vote. What's up with that?
Under the provisions of the amendment, a family of four making less than $137,000 would pay less, while high-income families would pay more – mainly because the bill pays for low and middle-income tax relief by reducing the deduction for Federal income taxes paid.
GOP House members were horrified, naturally. Only 5 of 43 Republican House members voted for the bill.
As expected, they continued a tradition of obstructionism and stuck with their protect-the-wealthy-at-all-cost mindset. This time, with a little xenophobia thrown in for flavoring:
Rep. Mary Sue McClurkin, R-Indian Springs, voted against the plan. “This just takes a small percentage of sales tax off of food and imposes a large tax burden on those taxpayers that I represent,” she said.
McClurkin also said she didn't want to take the state sales tax off groceries for illegal immigrants.
Rep. Cam Ward, R-Alabaster, also voted against the plan. “I think it's a redistribution of wealth,” he said. “I think the majority of the folks in my district are going to have to pay for a very minimal amount of sales tax cut.”
Is there no tax cut for the wealthy too large, no tax burden on the poor too heavy, or no anti-immigrant measure too crazy and unenforceable for Republicans to support it?
The bill now goes to the State Senate, where it needs 21 votes to be placed on the ballot in November.
The battle is just beginning, folks. Read on for facts, figures, and talking points on the issue.
This bill is a sales tax decrease of $320 million.
Although this is a tax decrease for the majority of Alabama taxpayers, it increases tax income tax collections by $345 million. That's a net increase of $25 million. Given the starved budgets of most state agencies, there are plenty of uses for the extra.
In 2005, the poverty rate in Alabama was 17%.
According to the US Census Bureau:
- The estimated population in 2006 was 4,599,030
- The 2004 poverty rate was 16.1%
- The 2004 median household income was $37,062
Alabama's income tax rate is set by the state constitution at the following rates:
- Yearly taxable income of less than $500 ($1,000 for couples filing jointly) is taxed at 2 percent
- Income from $500 to $2,999 ($1,000 to $5,999 for couples) is taxed at 4 percent
- Income of $3,000 and above ($6,000 for couples) is taxed at the top rate, 5 percent
Until last year, families in Alabama had to pay state income tax once they made $4600/year! That was raised to $12,600, and the proposed amendment will increase it to make Alabama rates comparable to Mississippi (remember how we love to make fun of them?), who doesn't tax families making under $19,600.
Republicans had many excuses for voting no. One of the most creative came from Representative Mike Hubbard from Auburn:
“I agree we ought do something to lessen the burden among the poorest among us. I feel like it's not a tax decrease, it's really a shell game,” he said. “It's moving the responsibility on who is paying the tax.”
What is it about basic math that Republicans don't understand?
Yes, somebody has to pay. Unlike the Federal budget that GOP leaders cheerfully bankrupted during their time in power, the state budget must be balanced. So somebody has to pay. The question is whom?
Shouldn't it be the families most able to pay instead of the struggling working poor and middle class?
According to Alabma Arise and Rep. Knight, the tax savings are substantial for low and middle income families:
Adjusted Gross Income Savings
$10,300 $ 166
$20,000 $ 540
$30,000 $ 760
$40,000 $ 760
$50,000 $ 693
$60,000 $ 405
$75,000 $ 234
$100,000 $ 25
The savings for those below $60,000 are calculated using the standard deduction and those above $60k using itemized deductions.
Ok. so this doesn't seem fair to Republican leaders?
Now consider that these numbers are taxable income. That means the hypothetical family of four with $50,000 in taxable income has already subtracted almost $20,000 in exemptions and deductions. So they started with about $70,000!
That family saves almost $60/month under this new plan.
Remember, the median household income in Alabama is about $37,000/year. This isn't a giveaway to the poor; it's middle class tax relief.
But look at who the Republicans are looking out for: those making over $100,000. Those are the people they're worried about “protecting” from unfair increases.
They're the people who need our “protection” the least!
But, of course, they're the people that state GOP leaders worry about the most. As George W. Bush jokingly noted at a political fundraiser in New York in 2000:
“This is an impressive crowd – the haves and the have-mores. Some people call you the elites. I call you my base.”
While Alabama Republicans struggle to protect their “base,” it's up to us to look out for the 80% of Alabama families who will benefit from this legislation.
Call or write your senator NOW and urge him/her to support the bill. Rules Committee chair, Lowell Barron, plans to bring the bill up for debate, but we don't know when.
Once the bill passes the Senate, the proposed constitutional amendment will have to be approved by votes in November.
We have a lot of work ahead of us!