Tax plan deserves state vote

Alabama lawmakers routinely resist any increase in taxes. Soon they will have an opportunity to demonstrate whether their concern is about taxes in general, or just about taxes on the wealthiest Alabamians.

It is difficult for voters to understand how upside down the state’s tax structure is because we are used to hearing about very different issues in federal taxation. No one is proposing a flat tax in Alabama, but imagining its application helps to demonstrate the unfairness of the state’s tax structure.

The problem with a flat tax — a single tax rate that would apply to all income levels — on the federal level is it would increase the amount the poor and middle class would pay, while decreasing the taxes of the wealthiest Americans. It would be unfair, most agree, because it would increase the economic burden on those who can least afford it.

If a flat tax replaced all other taxes in Alabama, it would do the opposite. The poor and middle class already shoulder most of the tax burden for the state. If they were to pay the same percentage of their income as the wealthiest Alabamians, they would rejoice.

A bill filed by Rep. John Knight, D-Montgomery, would not create a fair system, but it would help.

The bill would make two changes.

First, it would eliminate the state sales tax on groceries and over-the-counter drugs. This would reduce annual revenue by about $326 million. It would help level the taxation playing field because the poor and middle class spend a greater portion of their income on these necessary items than do the wealthy.

The only other state that does not limit taxes on groceries is — you guessed it — Mississippi.

Financial realities, of course, require that we replace the revenue.

Knight’s bill would accomplish this by eliminating a deduction that allows people to reduce their taxable state income by the amount of federal income taxes they pay. This would have a modest effect on the poor and middle class — more than offset by the elimination of the grocery tax — but would increase the state taxes paid by Alabamians with high incomes.

Only two other states have a full deduction for federal income taxes paid. Eliminating the deduction would raise about $485 million a year.

Knight’s bill would direct the net $159 million increase in revenue to the Education Trust Fund.

Neither of these changes can occur without a constitutional amendment, which requires a vote of the people.

The Legislature should pass the bill. It is time to let the people decide whether they want a fairer Alabama.

http://decaturdaily.com/stories/Tax-plan-deserves-state-vote,93430

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Filed under Alabama politics, Tax reform

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