|
The state of Alabama is standing at
a crossroads, the same crossroads where Tennessee waited in July
2002 as lawmakers debated whether to reform its antiquated and regressive
tax structure.
Unfortunately, Tennessee took the path
of least resistance when the General Assembly voted to raise its
sales tax by 1 cent, giving Tennessee one of the highest sales tax
rates in the nation.
Let us hope that Alabama voters choose
a different path when they vote Tuesday on a referendum to reform
their ailing tax structure. Republican Gov. Bob Riley is proposing
a $1.2 billion tax package that, among other things, will ease the
burden on lower-income people and increase taxes on farms and timber
tracts of more than 2,000 acres.
The potential impact of this referendum
on Alabama is momentous.
Will Alabama, like Tennessee, continue
to be known as a cheap labor state, where too large a percentage
of the population is under-educated? Where high school dropout rates
are among the highest in the nation? Where state services are minimal?
Where higher education is underfunded?
Or will it become a leader in the New
South by creating a modern tax structure that can fund education
and other necessary services adequately, and thereby attract the
high-tech jobs of the future?
The Institute on Taxation and Economic
Policy in Washington compiles a list of the 10 most regressive tax
structures in the United States. Tennessee is No. 3 on that infamous
list, and Alabama is No. 10. Both states have antiquated tax structures
that disproportionately tax lower-income people while allowing wealthy
individuals to escape paying their fair share.
Their tax structures have an inherent
structural deficit, which is a fancy way of saying that revenue
generated does not keep up with the state's necessary expenses.
Both Tennessee and Alabama tax groceries
with a sales tax that hits working families the hardest. It is unfortunate
that Riley's tax reform plan does not remove Alabama's sales tax
on food. As University of Alabama law professor Susan Pace Hamill
points out in her paper "The Least of These: Tax Reform and the
Commands of Faith," policies that milk more revenue from those who
have the least are unethical, especially if one professes to be
a Christian.
Such policies are also irrational and
have resulted in chronic revenue problems for both states.
Unlike Tennessee, Alabama has an income
tax, but it is a regressive one that kicks in when a family earns
as little as $4,600 a year. The state also grants taxpayers a full
deduction on the federal income tax they pay, a provision that primarily
helps higher-income citizens. As a result, those who earn less than
$13,000 a year pay twice as large a share of their earnings in state
and local taxes as do citizens who earn more than $229,000.
Under Riley's proposed reform, Alabama
residents wouldn't pay any state income tax unless their annual
income reached $17,000 this year - and eventually, $20,000. Sixty-seven
percent of Alabamians would pay the same taxes, or less, under Riley's
plan that they do now.
Like Alabama, Tennessee is struggling
to recover from the recession. Gov. Phil Bredesen barely had time
to climb out of his inaugural tuxedo before he was facing large
deficits, in spite of the 2002 sales tax increase that generated
$933 million in new revenue. Bredesen's response was to cut state
department budgets across the board by 9 percent.
Such cuts in spending hit low- and
moderate-income people with a double whammy: higher taxes and fewer
services. They are not a formula that will create a healthy, prosperous
population and encourage economic growth.
Although recent polls suggest they
will not, I hope the people of Alabama will choose to go down the
road of progress by voting for tax reform this week. Their state
could become a model for Tennessee to follow the next time we face
a revenue shortfall.
Tennessee's sales tax cannot be allowed
to go much higher. Vital government services have already been cut.
Let us hope that our state leaders will have the fortitude to take
the right road the next time around.
To contact Nell Levin, E-mail to: nellrose@earthlink.net.
For information on the Tennessee Alliance for Progress, visit www.tennesseeallianceforprogress.org
|
