Simply put, if SB-409 (the flat tax) passes in Alabama, corporations will keep their income tax breaks but human taxpayers won't. Deductions for pension income and other expenses disappear for citizens, but the bill specifically allows corporations to keep their deductions and credits. It gets better (for business): the income tax rate they'll pay after their deductions also goes down. Can you say windfall?
(2) A corporation may carry forward any current net operating loss or capital loss earned prior to the date this amendment is ratified until it is utilized or otherwise expires.
(3) All other deductions, credits, or exemptions for corporations in effect on the date this amendment is ratified may be claimed.
Here's the question: how long do corporations get those "deductions, credits, or exemptions?" Forever, it looks like. The bill text says that the only way deductions can be added after the amendment goes into effect is by an 80% vote in each house. There is no mechanism specified in the bill to remove deductions/exemptions/credits.
They're making it hard for individuals to get tax breaks and easy for corporations to keep them.
This constitutional amendment, if approved by the Legislature and voters, will pad the bottom lines of businesses operating in Alabama. But low to middle-income people may be in for a nasty surprise.
Mortgage interest deduction - gone.
Federal income tax deduction - gone.
State pension income deduction - gone.
All other individual deductions except charitable contributions - gone.
The burden of this "reform" falls disproportionately on lower income taxpayers, but that's (sadly) nothing new for this state. The bottom 20% will pay more, while the remaining 80% of households could see their state taxes decline: the higher the household income, the greater the savings.
It's just unbelievable that this bill could be considered "revenue neutral," like the sponsors claim. Individual people hear that promise, along with the "file your taxes on a postcard" claim and think it sounds great!
Until you go back to basic math: if corporations are going to pay less, the effect is "revenue neutral," then somebody, somewhere has to pay more. That would be us.
Hightower said at press conference Tuesday that both of the proposals would allow Alabama to stay competitive for businesses looking to locate in the region.
"There are over 100 plus deduction credits that we have amassed over 60-plus years of legislating," he said. "We're competing with other states and we've got to win this war."
So we're at "war" with other states and the only way to "win" it is to increase the taxes on pensioners and the poorest families and cut business taxes. Nice.
The public hearing tomorrow is before the Senate Finance and Taxation Committee at 10:30 am in Room 727 of the Alabama Statehouse. If you can't attend, contact your Senator and demand that any tax "reforms" be targeted towards making the system more fair and equitable for state residents.
I haven't decided how I'll vote on this question and I suspect many other progressives are conflicted as well. The Alabama Democratic Party advises a "YES" vote. One of the best progressive organizations in the state, Alabama Arise, has put together a fact sheet on the $437.4 million transfer request. Arise members will meet in Birmingham this Saturday to hammer out a recommendation on this question.
I'd much rather be voting on changes to the tax structure and am tempted to vote "NO" on principle -- after all, this is nothing more than a short-term band-aid and definitely not the right way to shore up the general fund. But the September 18th vote is a game of chicken with the extremists controlling our legislature.
Will our GOP supermajorities really hurt little children and their mothers if we don't give them the money now?
Simple. The Alabama Legislature just approved a budget that spends money they don't have yet and may never get. It's a great trick if you can do it!
But the total of $1.67 billion in General Fund spending would depend on the General Fund getting $145.8 million from the Alabama Trust Fund, a giant state savings account. That would happen only if voters agreed to rewrite the state constitution in a referendum scheduled for Sept. 18.
This is an extreme version of Let's Kick the Can Down the Road ... for a piddling 4 months. It's also a completely unsustainable "solution" to our recurring budget crisis, like dipping into your savings account for living expenses. It doesn't address the problem -- inadequate revenue from an outdated tax structure -- just covers it up for a little while longer.
What happens if voters refuse to let the Legislature raid the Trust Fund? Either an absolute bloodbath of proration or the governor will have to relent and -- after going hat in hand to Grover Norquist for permission -- reconvene the Legislature to consider (gasp!) raising taxes.
The General Fund needs new revenue. It shouldn't come from robbing the Trust Fund. Republicans have supermajorities in the Legislature and control the executive branch. They are in full control and the hard choices fall on their watch -- not "what else can we cut?" but "how can we raise enough money to pay our bills?"
You "conservatives" talk a lot about fiscal responsibility. Spending money you don't have is not responsible. Dipping into savings for living expenses is not responsible. Responsible would be raising taxes on those who aren't paying their share now -- even if they happen to be some of your biggest donors.
Stop kicking the can down the road and raise the money to pay Alabama's bills.
Why is it so easy for the Legislature (by unanimous vote, no less) and the Governor to lift the state sales tax on generators, plywood and cell phone chargers (granted, only for a weekend) and aircraft parts (all the time) but so impossible for them to remove the same state sales tax from groceries?
The disaster tax holiday only benefits people who can afford to prepare for disasters. Untaxing groceries would help families at all levels -- even those who can't afford generators and plywood, let alone aircraft parts -- keep food on the table.
Alabama and Mississippi are the only states that still charge the full sales tax rate on groceries, and as you can see from the chart below (2006 data), the sales tax hits families in the bottom 80% of earners much harder than it hits folks at the tippy-top income levels. Why can't the Alabama Legislature do something that will have a positive economic benefit for roughly 90% of Alabama families?
That's 20% taken off the top of a general fund budget that has already been reduced by several years of cuts. State Rep. Patricia Todd (D) pulled no punches in the State House:
"We're going to have blood on our hands," Todd told House members. She called the proposed budget "the most un-Christian document I have ever seen."
Alabama legislators will indeed have blood on their hands if this budget stands. In their zeal for ever lower taxes they are refusing to look at the other side of the budget equation -- the revenue side. Their entire focus is on cutting spending, to the exclusion of any possible tax increase on anyone, even those who are patently not paying their fair share now.
Rep. Jim Barton, R-Mobile, in an interview replied, "We tried to provide the best services to the citizens of Alabama that we could with the money that we had available."
Barton, the budget sponsor, said he doubted legislators would pass any "significant" tax increase this spring, despite calls from Todd and others for more revenue.
It's irresponsible and immoral for Republicans like Barton and Speaker Mike Hubbard and Gov. Bentley to sit there in Montgomery and say there's no money so these kids will have to die when they could, and should, be taking a hard look at the revenue side of the equation. But their spines are so sodden with "smaller government" Kool-aid they won't even TRY to increase revenue.
That blood on your hands will never wash off, gentlemen. This is the human cost of your no tax pledge to Grover Norquist.
If y'all thought that AL State Senator Shadrack McGill's (SD-08) low-water mark was when he said that paying teachers more was against God's will, or suggested that citizens more concerned with budgets than abortions needed "educating," or that women should be dissuaded from seeking "premeditated abortions," well... you were wrong. At the same meeting in Gurley on 2/13, Senator McGill displayed a breathtaking ignorance of state budgeting even as he assured the assembled citizens that there's "a new day in Montgomery."
Well buddy, it's a cloudy day and there's no clearing in sight until the 2014 elections.
When questioned specifically about tax reform, tax fairness, and the "no new taxes" pledge ("How long does that last? A year? Two hundred years?"), the freshman senator from Woodville could offer nothing except GOP "no new taxes" and "job creators" talking points.
You could almost - almost - feel sorry for him except that he's happily voting on legislation with no thought to either the long-term or short-term consequences to the state or the people who live here.
Shadrack McGill may indeed be in over his head, but he and the GOP legislative super-majority are drowning the rest of the state with their stubborn ignorance and intransigence.
Here's the video. It's less than 5 minutes and probably won't lower your IQ by more than a point or two.... :-)
Tornadoes are not the problem, guys. The problem is that y'all care more about the super-rich & corporations than you do the ordinary working people in the state.
[Gov. Benjamin Meek] Miller announced that he intended to balance the budget by taxing those “who have the money [and] who have the ability to pay.” He wanted a graduated income tax.
To conservatives, it was heresy. They called the plan “un-American,” “socialist,” “communist,” even “Republican.” Such a scheme, they claimed, took money from hard-working Alabamians and gave it to the idle and lazy.
Austerity only gets you so far, so Alabama did get an income tax. In the 1930's it affected only the upper income brackets. Since that time, bracket creep has caused almost everyone, no matter how poor, to pay the state income tax.
Thus, we still need a graduated income tax in Alabama, one that doesn't raise money from those who are "battling for bread, hunting for food, seeking clothes ... and begging for the necessities of life."
Don't miss Shadrack McGill's State of the State Address Monday, Feb. 13th, 6 to 7 pm at the Madison County High School Library, 174 Brock Rd., Gurley.
Alabama state Senator Shadrack McGill (R, SD-8) is getting a lot of attention over his concern that paying teachers too much would attract the wrong kind of people -- those who weren't "called" to teach. Interestingly, his concern about the corrupting influence of adequate pay doesn't extend to legislators, but that's another blog post, or two.
Later Shadrack attempted to explain his novel views on teacher pay, offering an explanation which hasn't recieved nearly the attention it deserves. Here goes:
"Things ought to be in balance. I believe God made everything to be in balance. He weighed the Earth and the valley and the mountains and the hills on a scale to keep them in balance because he knew he was going to be spinning it real fast, so that's the jist of it."
Someone is spinning it real fast, for sure.
Interesting that Shadrack should bring mountains and valleys and the concept of balance into this discussion of wages, because that combination brings to mind the tremendous income imbalance in America today, which is near a record high. This chart illustrates the problem nicely.
Looks just like mountains and valleys, huh? The top 1% are sitting on those higher and higher mountain peaks while regular people who work for a living -- the bottom 90% of earners -- have been stuck down in the valley getting trickled on ... for the last 30 years.
That's an imbalance that needs fixing, Shadrack!
Multi-billionaire Warren Buffet pays a tax rate of 17.4%. His secretary, with a far more modest income, pays a tax rate of 35.8%. That's a factor of two, in favor of billionaires. Balanced? I don't think so.
How about fixing that imbalance, Shadrach!
Let's bring this even closer to home with this chart showing the effect of state and local tax rates in Alabama, courtesy of an Alabama Arisefact sheet on taxes.
Hard working Alabamians making less than $26,000 a year are paying more than 10% in state and local taxes while the top 1% get off with less than half that. Again, a factor of two, in favor of the very wealthy. Balanced? Not hardly.
These are the imbalances that keep poor working people down in the valley while millionaires sit ever higher on the mountains. These are the imbalances that need fixing, Shadrack, not some pipe dream where we're endangering the souls of teachers by paying them too much.
Will you use your position as a state senator to correct the imbalances in our tax code, Shadrack? Or was all that talk about God and keeping the mountains and valleys to scale just YOU spinning real fast trying to talk your way out of a bad spot?
"When Robert Bentley talks about tax reform and not raising new taxes, do you think he's worried about me and you? No. You compare how much you pay on your house to how much an out of state timber company pays an acre of land..."
That's Alabama Democratic Party chair Mark Kennedy discussing the state's budget in Huntsville Saturday morning. Speaking at the Mens Democratic Club breakfast, Kennedy contrasted the tax burden of many large industries to Alabama citizens' taxes. Characteristically, he was blunt in his assessment and clear in his prediction:
"You hear Robert Bentley - when the state is literally sinking into the depths of despair - saying 'no new taxes.' He's not talking to me and you. He could care less about what we do. He's talking about protecting big businesses because he thinks that they aren't going to turn on him like a hungry wolf when he runs for reelection.
In my opinion, Governor Bentley - a nice man - is going to be history. Bob Riley, Hubbard, and Beason are going to be running the state and Bentley's going to be thrown under the bus.
And he just hasn't figured it out yet."
Kennedy makes a good point about Bentley's cluelessness. The General Fund faces a crippling $400 million shortfall this year - out of a $1.8 billion budget. According to the Governor, that could mean cuts of 25% to already-underfunded state agencies. While he stands firm on "no new taxes," Gov. Bentley's early budget proposals included draining the Education Trust Fund (he's abandoned that non-starter) and borrowing $2 billion for highway construction.
Hubbard said writing an operating budget for fiscal 2013 may be so hard that lawmakers won't be able to finish in the regular session. If that were to happen, Bentley would have to call them back in special session, which would cost the General Fund an estimated $100,000 to $300,000, depending on how long it lasted.
If that's true, hopefully hapless Governor Bentley won't be the only elected official losing his job in 2014.
No program in our government has surged out of control more dramatically than food stamps. And nothing is being done about it. [...] Multimillion dollar lottery winners are getting food stamps because the money is considered to be an asset not an income. One of the fast and furious gun buyers –
HOST: But hold on, for ever lottery winner that has food stamps, there’s probably a lot more people who really need them who have them, right?
SESSIONS: Well look, do you think there are four times as many people who need food stamps today as in 2001. That answers itself. [...] We cannot do this. We do not have the money. Congress doesn’t understand that we can’t afford to double the program every three years.
Now, let's think about this. Certainly, the guy in Michigan is exploiting a loophole that needs to be closed. And Michigan is working on that with the Federal government because the $5k or so this guy receives is money that could go to people who are truly hungry.
Just like the money that General Electric - and other multi-national corporations - didn't pay could go to provide stuff like.... health care, education, deficit reduction, what have you.
Yet, our Senator has declared that asking millionaires & billionaires to pay their fair share of taxes is "rather pathetic." Here are a few stats that don't seem to strike the good Senator as "pathetic:"
More people are receiving food stamps because more people need them in this weak economy that the GOP seems hell-bent on making worse.
So here's an idea. Let's fix the system that lets a handful of lottery winners collect a couple of thousand a year. Then, once we put that pressing national nightmare to bed, let's fix the broken tax system that lets the wealthiest hire lobbyists and buy senators to work the system for them.
Because truly, Senator, the only person looking "pathetic" here is, well, you.
It’s time for greedy corporations and the insatiable rich to pay their fair share. It’s time to stop cuts to the government programs most treasured by and vital to the middle class and the vulnerable in this country – education, public transportation, Social Security. It’s time to stop right-wing attempts to terminate democratic rights like collective bargaining and voting without harassment. It’s time for the middle class to stop paying for everything and for the insatiable rich and greedy corporations to start sharing the sacrifice required to recover from the economic crisis caused by reckless gambling by Wall Street bankster corporations.
Gerard was referring to federal tax evaders, but we have plenty of corporate tax freeloaders right here in Alabama. Yesterday, Alabama Democrats announced their legislative agenda to stop those freeloaders.
In 2008 over a thousand corporations collectively earned upwards of $100 billion in Alabama but paid nothing in state corporate income taxes. The House Democratic Caucus will introduce a package of a dozen bills to put a stop to corporate freeloading, ensuring that corporations pay Alabama income taxes on income they earn in Alabama. If this corporate responsibility package passes the Republican dominated Legislature, it will bring in an additional $200 million next year for the Education Trust Fund which has a $165 million shortfall this year.
“Democratic lawmakers have made a choice,” said Democratic House Minority Leader Craig Ford (D - Gadsden). “Our ‘handshake’ is with the teachers, students, and working families of the state, not with the big businesses that are abusing our tax code for the sake of profit.”
“In 2008, 1700 companies doing business in Alabama reported $413 billion in income to the IRS but paid absolutely no Alabama state income tax,” said Representative Richard Lindsey (D - Centre). “There were 16 companies in Alabama that reported $1 billion in federal income each. Yet they paid zero Alabama income taxes.”
Alabama Democratic Party Chairman Judge Mark Kennedy applauded the move, saying, “Alabama Republicans blame our budget on our public servants while big corporations avoid paying millions in state taxes. Closing these loopholes will ensure these big business pay their fare share, instead of forcing small business owners and hard-working Alabamians to shoulder the burden alone.”
One of the most commonly used loopholes allows companies with offices in Alabama to pay rent or management fees to shell offices in Delaware and other states with low or no corporate income tax rates. These payments keep profits within the business, but reduce the taxable income the business earns in Alabama, costing the state millions in uncollected corporate taxes.
The Democratic legislative agenda includes closing corporate tax loopholes, eliminating the sales tax on groceries and closing the federal tax deduction loophole, among other items. UPDATE: A list of the twelve bills is included below the fold.
The current budget crisis is not the fault of working Alabamians (or those who can't find work) and the solution can't be to keep increasing the burden on people who are barely getting by. It's great to see Alabama Democrats have grown a spine and are standing up to demand the fat cats -- Gerard's "greedy corporations and insatiable rich" -- finally start paying their way in Alabama.
Our state’s taxation system, designed by the wealthy, protects the wealthy from financial loss. Those who are hurt by the capitalist system pay a greater share of their income to support it than do those who benefit from the system. Altruists worry about the impact of such an upside-down system on the poor. Realists worry about what happens when a majority of the state’s people, with the force of votes and arms, wake up to the game.
The answer to Alabama’s budget problem is simple: Those who benefit from the system need to pay more to support it. The federal government needs to reduce expenditures; the state needs to increase revenue through taxation reform.
Essentially, reform or be reformed. FDR knew this was true. I don't think Alabama leaders get it yet.
Anyone offended by the welfare state label needs to be voting for higher state taxes. About $8.66 billion a year in higher state taxes. That's what it will take to replace the federal dollars in Alabama's budget this year.
“If you don’t want federal interference, you’d better be prepared to pay for it with higher state taxes,” said Bill Stewart, The University of Alabama professor emeritus and constitutional expert.
Stewart may not understand the situation -- folks here want the money and they want to gripe about federal interference.
There was an election in Oregon on Tuesday and progress won. Voters agreed to raise taxes on corporations and the wealthy to fund schools and other services. How did they do it and does Oregon have a lesson for Alabamians who want to see progress on tax reform?
... backed by a broad coalition of small businesses, educators, public safety advocates, unions, and religious groups- have passed, according to The Oregonian (a paper which campaigned vigorously and unethically against the measures in league with big banks and other defenders of the status quo). ... This is a victory for Oregon! We've shown the nation tonight that progressive policies that benefit small business, schools, public safety and social services can earn the respect and the votes of the people! The White House and Congress should take note.
The formed a "broad coalition of small businesses, educators, public safety advocates, unions, and religious groups" to champion "progressive policies that benefit small business, schools, public safety and social services," thereby earning "the respect and the votes of the people!"
Any suggestions on how we can replicate this coalition in Alabama? Who would be involved? What progressive policies are most likely to be successful?
If you're looking for hypocrisy on the grocery tax issue you need look no further than GOP Chairman Mike Hubbard and his Republican cohorts in the Alabama House of Representatives. Three times this session they have blocked HB116, a bill to allow citizens to vote on removing the 4% state sales tax on groceries, making up the lost revenue by capping the state income tax deduction on federal taxes paid. 95% of Alabama taxpayers will see a tax reduction under this proposal, but the 5% who form the upper crust have the House Republicans firmly in their pockets.
Oh, Mike Hubbard and his GOP cohorts talk a good game. To hear them tell it they are all for removing the sales tax on groceries, of course they are, but (whine, whine) they just can't see their way clear to closing that federal tax deduction loophole for the upper crust. Their talk sounds fine, a stellar example of fluent BS in fact, but the past actions of Hubbard and other House Republicans reveal rank hypocrisy.
The Senate voted 20-11 Thursday, with three abstaining, to bring the bill up for debate, but that was one vote short of the required three-fifths majority.
... Among those who voted to abstain were Sens. Tom Butler, D-Madison, and Arthur Orr, R-Decatur. "It's not over yet," Butler said, explaining that he was using his vote as a bargaining tool to get his quarry bill out of Sen. Zeb Little's committee.
Sen. Larry Dixon (R, Montgomery) is sticking with the food stamp argument against grocery tax relief: "I don't care what people say about poor people. Poor people get food stamps." Food stamps aren't particularly relevant to the tax argument, but who can doubt Dixon cares not what people say about poor people -- or about poor people at all. Dixon has no problem cutting taxes, but doesn't want to make up the lost revenue -- like Alabama has a budget surplus or something?
Dixon said he favors taking the state sales tax off groceries but didn't want to make up for the loss by raising other taxes.
It turns out Sen. Dixon prefers to travel back in time and remove the grocery sales tax one per cent each year starting in 2003. Who knew the Legislature had a time machine?
Can voters use the Legislative time machine to send some of these dinosaurs back to the stone age where they belong?
Pointing to the tax breaks provided to Alabama farmers, [Sen. Hank] Sanders said, "There is something wrong in Alabama when we decide we ought not to tax food for calves but we tax food for babies."
Yes, there is something wrong with Alabama Senators who won't tax food for farm animals but insist on taxing food for human children. Here are the three Senators who did not have the guts to actually cast a vote on this truly family friendly legislation:
Jim Preuitt (D, SD11) (334) 242-7898, (256) 362-5253, (256) 362-6900
From Alabama Arise, emphasis mine:
The grocery tax bill, House Bill 274, failed to get the 21 votes needed to bring it up for debate. The vote was 20-11, with 3 abstentions (Butler, Orr, and Preuitt) and one absent, Charles Bishop (perhaps a favor to us?).
We will try again. It's likely to come up again by the end of the day. Sen. Smitherman promised to filibuster until this bill gets its chance for floor debate.
Our 21st vote will probably come from one of the senators who abstained. If you know anyone in the following places, ask them to call their state senator's office and urge him to vote for House Bill 274.
The people should be allowed to vote on whether they want the grocery tax reduced.
NOTE: If the senator's secretary argues back with you, saying that the taxes will just be shifted to others, tell them that you believe it's a good thing for high-income people to lose a tax break so that everyone can pay lower grocery taxes. Details are at www.alarise.org .
People who live in Decatur should call Sen. Arthur Orr, (334) 242-7891.
People who live in Athens, Madison, or the north part of Huntsville should call Sen. Tom Butler, (334) 242-7854.
People who live in Talladega, Sylacauga, Oxford or Anniston should call Sen. Jim Preuitt, (334) 242-7898.
My Daddy always told me Republican party was "looking out for the rich man" but you hardly ever hear the GOP admit it. Apparently they've completely lost their heads and are telling the truth in a desparate attempt to kill legislation that would let the people of Alabama vote on removing the 4% state sales tax on groceries.
Let's be clear, this is not a radical idea. Alabama and Mississippi are the only states that still require people to pay full sales tax on grocery purchases. This is from Sebastian Kitchen's article, emphasis mine.
Democrats said the wealthiest 20 percent of people in Alabama would pay more with most of the increases being minimal.
[Rep. John] Knight said the tax increases would be small for most Alabamians except for the wealthiest 5 percent and "I submit they can afford it."
"A lot of that 5 percent lives in my district," Waggoner said. " ... This is a tax increase on the people I represent."
Sen. Larry Dixon, R-Montgomery, has echoed similar comments about raising taxes on his constituents. He said poor people have food stamps.
So, asking the wealthiest 20% to give up just one of their tax breaks so the poor can afford to buy food is a bad thing? Jabo Waggoner says it's "a tax increase on the people I represent." It's interesting that Waggoner doesn't feel obliged to represent anyone in his district who falls outside the wealthiest 20%, or maybe even the wealthiest 5%. What a great campaign bumper sticker:
I REPRESENT THE RICH GUYS
And what about Sen. Larry Dixon?
THE POOR HAVE FOOD STAMPS
Absolutely true. The poor have food stamps to helps some with their grocery costs. Who doesn't have food stamps? The middle class and the folks not quite poor enough to qualify for public assistance with their groceries. Too bad! Those people aren't Republican constituents, either.
With their backs against the wall on this legislation to ALLOW THE PEOPLE TO VOTE on the question to remove the 4% sales tax on food, Alabama Republicans are showing their true colors.
EVERY MAN FOR HIMSELF AND WE'LL TAKE CARE OF THE RICH GUYS