Huntingdon College: Political Science and Public and International Affairs programs
Collection of Articles on Alabama's Tax Reform Proposals, Sep '03.
Compiled by Jeremy Lewis, for my students' research purposes, revised 7 Sep '03.
DAVID WHITE, "Riley says voters' choice: Increase taxes or face cuts."
Birmingham News staff writer
MONTGOMERY - Voters on Tuesday will make a choice that Gov. Bob
Riley says will affect Alabama for generations: Whether to accept or reject
his plan to raise taxes and change public schools and state agencies.
Riley's plan, Amendment One, will be the only statewide issue on the ballot.
The plan would raise state and local taxes by $1.2 billion a year when fully
phased in, starting in 2008. It also would set up a college scholarship program, make
changes Riley says would improve public schools and ban lawmakers from hiding
money in state budgets for special projects.
Riley has pitched his plan at
churches, civic clubs and schools across the state for months, and he is
scheduled to do it today from 5 to 6 p.m. in a televised debate hosted by
ABC 33/40. Stations in Mobile, Huntsville and Montgomery also will
broadcast the debate, which will pit Riley against former state Sen. Bill Armistead.
Riley is scheduled to make a fly-around tour Monday of six cities,
including Birmingham. Officials with the Tax Accountability Coalition,
which opposes his plan, say they'll respond as needed.
Riley says his plan could fill a state budget shortfall that could total $675
million next year and raise enough additional money to create a
world-class school system in Alabama.
Riley closes many speeches by telling voters, "Choose wisely." He warns
of painful cuts in state services if voters say no on Tuesday.
"You can cut back and you can make Alabama's government almost
completely dysfunctional," he told a crowd recently. "We can cut back
social services. We can cut back education. We can cut back on public safety."
Roger McConnell, who formed the Tax Accountability Coalition, says
voters don't trust lawmakers.
"We don't trust them with another $1.2 billion of our hard-earned money to
spend on pork, pay raises and programs that don't work," said McConnell,
a former chairman of the state Republican Party.
Riley's plan would be the biggest tax increase in Alabama history, by far.
It would take effect gradually. By 2008, it would boost total state and local
taxes in Alabama by about 13 percent. But Alabamians still would pay
less in state and local taxes than people in most other states.
Alabama ranked 48th among the 50 states in 2000 in state and local
taxes paid as a percentage of residents' personal income, at 8.91 percent,
according to figures from the U.S. Census Bureau and the Bureau of Economic Analysis.
If Riley's plan had been in full effect in 2000, Alabamians would have paid
10.04 percent of their personal income in state and local taxes, ranking
34th among the 50 states.
The plan, which totals almost 600 pages, includes 19 laws and a
proposed amendment to the state constitution.
One law in Riley's package already has taken effect. It required Alabama
to spend as much on salaries for teachers and other public school
employees this year as last year. The law will make Alabama spend $140
million this year, whether or not voters approve Riley's tax plan, to ensure
the employment of about 3,000 people, many of whom would have
otherwise lost their jobs. Teachers lobbyist Paul Hubbert demanded that
job guarantee in return for his support of Riley's plan. The other pieces of
the plan will take effect only if most voters say yes on Tuesday.
Here's a closer look at those parts of Riley's plan:
The proposed amendment to the state constitution is linked to 18 other
laws in the Riley plan. Voters must accept or reject them as a package.
They may not pick and choose.
The amendment would lock into the constitution many of the changes
Riley's plan would make. For example, the plan would raise the state
income tax rate from 5 percent to 6 percent for wealthier people.
A regular law on its own couldn't do that. The state constitution's current
tax-rate cap for individuals also would have to be raised from 5 percent to
6 percent. Amendment One would do that.
If voters pass Amendment One, the Legislature could later pass a law on
its own to impose the 6 percent tax rate on everyone, not just the
wealthier people affected by Riley's plan.
Amendment One also would create the Alabama Excellence Initiative
Fund, which would get virtually all the state money raised by Riley's plan.
The plan would raise state taxes by $651 million and city, state and local
school taxes by another $52 million next year, according to estimates by
the Legislative Fiscal Office.
It would raise state taxes by about $1.1 billion a year and local taxes by
$123 million a year by 2008. The fiscal office did not estimate growth in
tax collections caused by inflation.
The Alabama Excellence Initiative Fund would not be earmarked, or
reserved, for any specific purpose. Lawmakers could spend it on whatever
they saw as Alabama's biggest needs.
The proposed fund has drawn lots of attention.
Riley says it would let lawmakers run the state more efficiently. He notes
that Alabama earmarks almost 90 percent of state taxes and fees for
specific purposes such as paying teachers' salaries and paving roads. The
50-state average is about 22 percent.
Riley says earmarking robs lawmakers of the flexibility they need to shift
money to where it's most needed, as priorities change over the years.
Critics say the Legislature, which must approve state budgets, doesn't
deserve to be trusted with an extra $1.1 billion a year that it could spend
however it wants.
Amendment One also would create a rainy day fund of $72 million that
could be tapped by the governor to prevent proration, or across-the-board
spending cuts, in the General Fund that supports state agencies.
Proration happens when tax collections fall below forecasts used by
lawmakers in writing state budgets.
The $72 million would be taken from the $2 billion-plus Alabama Trust
Fund, which was formed from natural gas royalties paid to the state. Any
money withdrawn from the rainy day fund, plus interest, would be repaid
automatically starting the next year from the General Fund in five equal
Voters created a similar $248 million rainy day fund for education last
year, but lawmakers under current law aren't forced to repay money taken
from that fund. Under Amendment One, any money withdrawn from the
education rainy day fund, plus interest, would be repaid automatically
starting the next year from the Education Trust Fund in five equal annual
Riley's plan would raise personal and corporate income taxes by $573
million in 2005. That total would drop over a few years as some
exemptions took effect.
The plan would raise $421 million a year by 2009, according to the
Legislative Fiscal Office, increasing individual income taxes by $375
million a year and corporate income taxes by $46 million a year.
It would lower state income taxes for many people with dependent
children. Alabama now starts taxing a family of four that takes the
standard deduction when its annual income exceeds $4,600. That
threshold would rise to an estimated $16,630 next year and rise to about
$19,000 by 2007.
But Riley's plan would raise state income taxes for most companies,
wealthier families and single people who make about $20,000 a year or more.
It would raise the top state income tax rate from 5 percent to 6 percent on
annual taxable income exceeding $75,000 for a single person, $112,500
for a head of household and $150,000 for a couple filing jointly. Taxable
income would include salaries, interest, dividends and capital gains on the
sale of investments.
Riley's plan also would raise state tax collections by ending many
deductions. People now can deduct from their state taxable income
federal income taxes, FICA (Social Security and Medicare) taxes,
occupational taxes and property taxes they pay. Those deductions would
end immediately, except that 75 percent of the federal income taxes paid
could be deducted for the 2003 tax year only. Then the deduction would end.
Any increases in state income taxes could be deducted from federal
taxable income to lower federal tax bills for people who itemize deductions.
Riley's plan would lower state income taxes for some people in several
ways. It would create an exemption, starting at $7,000 in 2006 and
growing to a maximum of $40,000 starting in 2011, on amounts withdrawn
each year from 401(k)s, Keogh plans, SEP individual retirement accounts,
traditional IRAs and other defined-contribution benefit plans. Those
retirement accounts now are fully taxed by the state. Retirement income
that already is exempt, such as Social Security, company defined-benefit
pensions and pensions paid to retired teachers, state workers and
soldiers, would remain exempt.
Riley's plan also would raise the values of standard deductions, personal
exemptions and dependent exemptions, which reduce taxable income.
The state standard deduction, for people who don't itemize, currently is 20
percent of income or $2,000 for a single person or head of household and
$4,000 for a married couple filing jointly, which ever is less.
Under Riley's plan, next year those values would be $4,750 for a single
person, $7,000 for a head of household and $7,950 for a couple filing
jointly. Starting in 2005, they would equal the federal values, which now
are comparable but rise with inflation.
The state personal exemption currently is $1,500. The state exemption for
each dependent is $300. Starting next year under Riley's plan, the
personal exemption and exemption for each dependent would equal 70
percent of the federal value, which rises with inflation. The federal value
next year is expected to be $3,100 for each personal or dependent
exemption. At that level, the state value would be $2,170.
For companies, the plan would lower the top state income tax rate from
6.5 percent to 6 percent.
But most companies would pay more in state income taxes because the
deduction for federal income taxes they pay would be phased out. A
company could deduct 75 percent for the 2003 tax year. After that, the
deduction would end.
State property taxes under Riley's plan would rise on all owner-occupied
homes worth more than $52,282, with one big exception.
Currently, people 65 or older and people who are blind or totally disabled
don't have to pay state property taxes, though most must pay local taxes,
and they would keep their state exemption under Riley's plan.
For everyone else, annual state property taxes would rise by $79 on an
$80,000 home, $136 on a $100,000 home, $279 on a $150,000 home,
$421 on a $200,000 home and $706 on a $300,000 home. More expensive
homes would get bigger bills. The increases would be phased in over four years.
State property taxes on cars, pickups, sport utility vehicles and other
passenger vehicles under Riley's plan would jump 259 percent. The state
tax on a car worth $8,000 would rise from $7.80 to $28 a year. The tax on
a $30,000 SUV would jump from $29.25 to $105.
State property taxes on land, buildings, equipment and other property
owned by businesses other than utilities would rise 169 percent and local
taxes would rise 10 percent. Those same increases also would be paid on
rental residences and on motorcycles and aircraft owned by individuals.
Property taxes also would rise on large farms and timber tracts. They
could drop on smaller farms and timber tracts, and also for utilities.
Overall, Riley's plan when phased in by 2008 would raise state and local
property taxes by $467 million a year, an increase of 30 percent
compared to last year.
Increases in state property taxes could be deducted from federal taxable
income to lower federal tax bills for people who itemize deductions.
Riley's plan would raise money largely by imposing the state property tax
on 100 percent of a property's value.
Currently, property is taxed at a fraction of its value.
Farms, timberland and owner-occupied homes are valued for tax
purposes, or assessed, at 10 percent of their value. Cars, pickup trucks
and other passenger vehicles are assessed at 15 percent. Most corporate
property and rental residences are assessed at 20 percent. So are
motorcycles and aircraft.
Property owned by utilities is taxed at 30 percent of its value.
Riley's plan also would lower the state property tax rate from 6.5 mills to
3.5 mills. A mill is 0.1 percent.
The plan would leave local property tax rates unchanged.
Also, local governments would keep taxing farms, timberland and
owner-occupied homes at 10 percent of their value. But the local tax
assessment for corporate property would rise from 20 percent to 22 percent.
Utilities would pay the same state and local property taxes they paid last
year until 2011 or until the value of their property rose by 36 percent,
whichever came first.
Then, local governments would start taxing utility property at 22 percent of
its value and the state would start taxing it at 100 percent of its value, the
same as for other companies. Alabama Power Co. has lobbied for
decades to have the same property tax assessments as other companies.
In another big policy switch, Riley's plan would limit the current-use tax
break, which values farms and timberland at below-market rates for tax
purposes, to an owner's first 2,000 acres. There now is no limit.
The plan also would make the current-use tax break less valuable to
farmers and timberland owners by raising those below-market values by
22 percent for farmland and as much as 32 percent for timberland.
Under Riley's plan, a farm of 10,000 acres could see its combined state
and local property taxes rise 521 percent by 2007, from $1.33 to $8.26 per
acre, the Public Affairs Research Council of Alabama estimated.
Riley's plan also would:
Raise the homestead exemption for state taxes on the full value of an
owner-occupied home from $40,000 to $50,000. The owner of a $50,000
home would pay no state property tax.
Let farm and timberland owners exclude, from state property taxes only,
either the value of up to 200 acres of their land or the first $150,000 in
improvements on the land such as poultry houses, but not a person's residence.
Anyone who took the new farmstead exemption could not take the state
homestead exemption on his or her home.
Riley's plan, if uncorrected, by 2008 could reduce local property taxes by
a total of $12 million a year for schools in Bessemer, Birmingham,
Fairfield, Homewood, Hoover and Midfield; for the governments of those
cities plus Pleasant Grove; and for Jefferson County hospital and fire districts.
The size of Riley's proposed tax increase could force them to lower their
local tax collections so their total state and local property taxes wouldn't
exceed caps that voters added to the state constitution in 1978.
But Riley said he and his aides made a mistake and never intended to
penalize local governments and schools. He promised to push for a law to
restore any local money threatened by his plan.
Riley's plan would raise sales taxes by $138.8 million a year for the state
plus $64.6 million a year for local governments, says the Legislative Fiscal Office.
The plan would impose a state sales tax of 4 percent, plus city and
county sales taxes, on labor costs for product installations and repairs,
such as replacing a car part or installing a refrigerator. State and local
sales taxes also would be imposed on warranty and service contracts.
The plan would not tax services by lawyers, doctors, dentists,
accountants, architects, barbers, cosmetologists and many others. Nor
would it tax labor for additions to real property, such as reroofing a house.
Riley's plan also would:
Raise from 2 percent to 2.5 percent the state sales tax on new and used
cars, trucks, motor boats, motorcycles and other motor vehicles and on
manufactured homes. Local sales taxes would not rise.
Raise the state tax on vehicle leases and rentals from 1.5 percent to 3
percent, starting Oct. 1, on new and existing leases. Local taxes would not rise.
Impose on motor oil a state sales tax of 4 percent plus city and county
sales taxes, but repeal motor oil excise taxes totaling 6 cents per gallon.
Riley's plan would raise the state cigarette tax from 16.5 cents to 31
cents per pack. A pack-a-day smoker would pay about an extra $53 a year.
State taxes on other tobacco products would double. The tax on a cigar,
for instance, would rise to 4 cents. The tax on chewing tobacco would rise
to 1.5 cents per ounce.
The tax increase would raise $52.4 million a year.
No local government could raise local taxes on cigarettes or other tobacco
products after Sept. 30 if voters pass Riley's plan.
Mortgage and deed fees.
Riley's plan would raise $44.8 million a year by doubling filing fees on
deeds and mortgages.
The deed recording tax would rise from $100 to $200 for a $100,000
house. The mortgage recording tax would rise from $150 to $300 for a
Two parts of Riley's plan deal with banks and other financial institutions.
Together they would net $11.3 million a year.
Riley's plan would:
Lower the excise tax rate from 6.5 percent to 6 percent. The excise tax is
similar to an income tax.
End some tax credits and deductions banks get, such as deductions for
federal income taxes and state sales taxes they pay.
Lower the maximum privilege tax on net worth that a bank could pay in
any year from $3 million to $15,000, the maximum for most other companies.
Insurance premium tax.
The plan would boost premium tax collections by $5.2 million a year by
reducing some tax credits for insurance companies, mainly Alfa.
Riley's proposed changes in utility taxes would lower state tax collections
by $3.7 million a year.
Taxes would drop slightly for customers of electric cooperatives, Alabama
Power Co. and other corporate utilities. For most customers, the net state
tax on a utility bill would drop from 6.2 percent to 5.75 percent.
Taxes would rise on customers of municipal utilities, who for years have
paid less tax. For most municipal utility customers, the net state tax on a
utility bill would rise from 4 percent to 5.75 percent.
Riley's plan would set up a scholarship program to pay undergraduate
tuition to public two-year colleges and four-year universities in Alabama.
Alabama high school students who meet academic requirements and
graduate in May 2004 or later would be eligible.
The program would begin with the budget year starting Oct. 1, 2004, if
state lawmakers fund it. They would not be required to do so. But Riley
says he has promised the scholarships and couldn't imagine lawmakers
refusing to fund them.
The state could spend no more than $120 million a year on the
scholarships. If demand exceeded that amount, tuition payments would
be cut proportionally.
Students who have prepaid college tuition contracts could spend that
money for other expenses, such as food and lodging.
To qualify for tuition at a four-year university under Riley's plan, a student
would have to have:
Earned at least a B average, 3.0 on a 4.0 scale, in high school.
Completed 18.5 units of the high school core curriculum: four units of
English, four units of math; four units of social studies, four units of
science, two units of a foreign language and a half-unit in computer science.
Earned at least a 20 composite score on the ACT college entrance exam,
or an equivalent score on the SAT entrance exam.
Of those three requirements, a student still would qualify for free tuition if
he or she met two of them but missed one by 10 percent or less. For
instance, someone who scored an 18 on the ACT but finished 18.5 core
units and earned at least a 3.0 grade point average still would qualify.
To qualify for tuition at a two-year college, a student would have to earn a
high school grade point average of at least 2.5 on a 4.0 scale.
No one convicted of a felony or a misdemeanor involving moral depravity
could qualify for a scholarship.
To keep a scholarship, a student would have to have a grade point average
of at least a 2.5 on a 4.0 scale after the first year, 2.7 after the second
year and 2.9 thereafter.
Riley's plan would protect teachers and other public school employees by
capping the share of health insurance premiums they would ever have to pay.
Public school employees with single coverage eventually would have to
pay 12.5 percent of the total premium. Those with family coverage would
have to pay 26 percent. The state would have to pay the rest.
Currently, there is no legal requirement that the state pay any of the
insurance premium costs for public school employees. Lawmakers in
theory could save hundreds of millions of dollars by slashing the state's
annual health insurance contribution for school employees and making
them pay more.
The Alabama Education Association teachers' lobby is urging its
members to support Riley's plan, in part because it would give them a
legal guarantee of state-funded insurance benefits that they now get by custom.
For state agency employees, Alabama law now requires the state to pay
the entire premium for single health insurance coverage, but there's no
requirement that the state subsidize family coverage. It now pays for most
of that benefit.
Under Riley's plan, state employees eventually would pay 12.5 percent of
the total single-coverage premium and 26 percent of the premium for
family coverage. The state would have to pay the rest.
The plan also would set maximum contribution amounts for retirees.
Any increase in monthly health insurance premiums for employees or
retirees of public schools or state agencies would be made gradually, and
only in years when people got pay raises or pension increases.
An active state employee with single coverage now pays no health
insurance premium. The state pays the total cost, which this year is $252 per month.
Under Riley's plan, that employee eventually would have to pay 12.5
percent of the total premium, which this year would have been $31.50 per month.
For retirees of either public schools or state agencies, under Riley's plan:
Those not on Medicare eventually would have to pay 30 percent of the
total premium for single coverage or 32 percent of the premium for family coverage.
Those on Medicare would have to pay 20 percent of the total premium for
single or family coverage.
Job security at schools.
One part of Riley's plan would streamline the appeals process for teachers
in public schools who are suspended or fired, with contests going before
hearing officers rather than circuit court judges. A hearing officer's
decision still could be taken to the Court of Civil Appeals.
Another part of the plan would do the same thing to the appeals process
for support workers in public schools, such as janitors and secretaries.
The state would start paying much of a school's cost of appeals. Riley
says that's important, since school systems now may be deterred from
trying to remove bad teachers because of legal expenses. Riley says his
plan could shorten the appeals process from as long as two years to six months.
Riley's plan would require public schools statewide to hire 1,550
"professional development" teachers who could be reading and math
specialists who taught students or coached other teachers. Hiring them
would cost about $100 million a year, which could be paid from existing
taxes or the Alabama Excellence Initiative Fund.
The plan outlines other programs, such as expanding the public school
year for students from 175 days to 180 days, but lawmakers would not
have to fund them.
The plan would give bonuses to certified teachers who agree to start
teaching, for at least three years, subjects with teacher shortages, such
as math. It also would pay bonuses to teachers who agree to start
teaching, for at least three years, in schools that have a hard time
The plan also would create college scholarships for education students
who agree to teach those subjects or work in those schools for at least
three years after graduation.
The state school board eventually would get $1.3 million a year to run the
programs. The board would set the value of bonuses and scholarships.
Riley's plan would end tenure for public school assistant principals,
financial officers and instructional supervisors hired on or after July 1,
2004. Each would first get a two-year probationary contract. A school
board then could decide whether to offer a three-year contract.
New principals already get contracts instead of the job protection of tenure.
School financial management.
The plan would make the state school superintendent develop and
conduct programs to instruct and test local school superintendents in
finance, instruction and education law.
Riley's plan would ban pass-through pork, money that dodges public
review at the State House because lawmakers don't list it by amount or
purpose when they debate and pass state budgets.
Key lawmakers each year pad the budgets of some state agencies with
more money than the governor requests. They later tell agency directors
how to spend the extra money.
Lawmakers spent at least $4.3 million in pass-through pork last year,
according to an investigation by The Birmingham News.
Riley's plan would make it a crime, punishable by three months in jail, for
an agency director to knowingly deal in pass-through pork. It would not
penalize a lawmaker.
The plan would not stop lawmakers from openly getting special pork
projects. For example, lawmakers set aside $11.7 million listed in this
year's education budget so each could bring to his or her district at least
$55,000 in "community service grants" of their choosing. Those grants
could continue under Riley's plan, but the plan might stop lawmakers from
hiding pork money.
KIM CHANDLER, "Support drops in new poll "
Birmingham News staff writer
Gov. Bob Riley's tax plan has fallen further behind, with opposition
mounting across racial, economic and party lines, according to a new poll.
The survey of 600 likely voters showed 58 percent would vote no
and 30 percent would vote yes. Twelve percent were undecided. The
poll has a margin of error of plus or minus 4 percentage points.
The plan was losing among all major demographic groups -
black and white, young and old, rich and poor, Democrat and Republican,
male and female.
The survey was conducted Tuesday through Thursday for The Birmingham
News and television stations FOX 6 in Birmingham, WHNT in Huntsville
and WSFA in Montgomery.
"Overall, his chances are very slim," said poll director Larry Powell, a
professor of communication studies at the University of Alabama at
Birmingham. "A lot can change in four days, but he would have a lot of
changing to accomplish."
Riley's $1.2 billion tax and accountability plan will be the lone item on
Tuesday's statewide ballot. The proposal would raise property, income
and other taxes while giving a break on income taxes to families making
less than around $40,000 a year. The money would help the state out of a
budget hole next year and give free university tuition to B students.
But voters across the state find the tax talk repugnant, according to the
poll, despite months of campaigning by the governor.
Riley, a millionaire Republican who has talked about relieving the tax
burden on the poor, needed the support of lower- and middle-income
voters to win Tuesday. He hasn't gotten it.
"The biggest change is among the middle-income voters, who have shifted
strongly against the proposal," Powell said. "Lower-income voters still
oppose the plan by a 2-to-1 margin."
Sixty-one percent of middle-income voters said they would vote no,
compared with 44 percent in a July survey. The poll defined middle-income
voters as those living in households earning between $30,000 and $60,000
each year. "When you lose the middle-income voters so greatly, you lose
the election," Powell said.
The proposal fared worse among lower-income voters, those in
households earning less than $30,000 a year, than with upper-income
voters who would see their taxes increase under the plan.
Among lower-income voters, 28 percent said they would vote yes and 59
percent said they would vote no. Among voters in households earning
more than $60,000, 38 percent said they would vote yes and 52 percent
said they would vote no.
Along party lines, 55 percent of Republicans and 57 percent of Democrats
planned to vote no, a party unity Riley probably would have rather not
"Looks like we've found something that Democrats and Republicans agree
on," Powell said.
A spokesman for the opposition, the Tax Accountability Coalition, said the
numbers were consistent with his group's polls.
"People just aren't buying into their arguments," Bob Gambacurta said.
"No. 1, it's distrust of Montgomery politicians. But No. 2, this is an
A spokeswoman for the Alabama Partnership for Progress, which is
organizing the campaign for the plan, said opponents have targeted
families who would benefit.
"They tried to inoculate people from the truth. Alabama families with
median incomes are going to get an income-tax cut," Marty Sullivan said.
"These poll results indicate that the people who would most benefit still
don't understand it."
Opposition has increased among all age groups, but the biggest shift
came from young voters and from voters 35 to 49 years old.
"The important thing about theses two demographic groups is that they
are the ones most likely to have children in school," Powell said. "The
proposal is being promoted as a plan to help their children's education,
but they're not buying it."
Powell cautioned that while victory is unlikely for Riley, it isn't impossible.
Nearly one-quarter of black voters polled said they were undecided how to
vote, reflecting a shift from the "no" category in a July poll. Thirty-seven
percent of blacks said they would vote yes and 39 percent said they
would vote no.
The undecided voters could help close the gap if they decide to support
the plan on Tuesday, Powell said. Riley's best hope, he said, is for a high
turnout among his supporters and complacency among opponents.
Prior to a 1999 referendum on a state lottery, polls showed voters easily
approving the proposal by then-Gov. Don Siegelman. They voted it down.
Polling before the 2002 gubernatorial election showed Riley with a
comfortable lead over Siegelman, but the outcome was a photo finish.
Riley's popularity has taken a significant hit as he has campaigned for the
tax plan. He had a 61 percent approval rating in Powell's July poll, but that
dropped to 53 percent in last week's survey.
However, Powell said it's impressive to have such a high rating while
pushing a tax plan that's being repudiated in the polls.
GORDON MOULTON, "Viable reasons not to vote 'no' Sept. 9."
Mobile Register, 09/03/03
By GORDON MOULTON
Special to the Register
During the last few weeks we have suffered a torrent of expensive,
negative and misleading media ads that argue that what we need in
Alabama is more of the status quo. With less than two weeks remaining
until the Sept. 9 tax referendum, many people no doubt still have
unresolved concerns and are undecided as to how they will vote.
If you are in that group, please consider the following points.
If you are thinking about voting "no" because you have been disappointed
with politicians in the past, I certainly understand your feelings. In my 37
years in Alabama, I have seen political shenanigans that would cause
more than a passing concern.
However, for every politician I have known who went to Montgomery for the
wrong reasons, I've known hundreds who have been dedicated and
committed to building a better state.
Do we think that progressive states such as Georgia and North Carolina
have more honest and better-informed legislators than we do? Should we
continue to eat the economic dust of these and other states because we
mistrust our elected officials? Surely not.
Furthermore, Gov. Bob Riley's accountability measures put real teeth in
the law regarding "political pork," including prison time for some offenders.
If mentally you already are pulling the "no" lever because proposed funds
are not designated for specific purposes, and you would like to know
where the money will be spent, consider this fact: In Alabama, more than
90 percent of all tax revenues are earmarked -- more than triple the
average percentage of other states, which is less than 30 percent.
Alabama's excessive degree of earmarking has been one of the greatest
barriers to comprehensive tax reform in the past. Voters in the past have
not wanted to raise taxes without having more choice as to where the new
money should go.
Under the Riley plan, all new money will go into a special "excellence
fund" dedicated to addressing the state's critical needs. The fund will be
under the watchful eye of a blue-ribbon citizens' committee.
Likewise, your elected representatives will have the final say on how the
money is used.
If you would say "no" because you think Alabama's taxes are already too
high, I would encourage you to take an honest look at the facts. In truth,
Alabama is at the bottom of the nation in its level of support for virtually
every aspect of state government.
Currently, the lowest-paid wage earners in Alabama suffer the highest
taxes through a system of high sales tax and an archaic, regressive income tax.
Gov. Riley's proposal will begin to correct this problem. Even after tax
reform, Alabamians in the aggregate will still have among the lowest taxes
in the nation.
Some say it is great that we have the lowest taxes in America, but is this
truly a mark of distinction if:
Our children lack the educational opportunities provided to those in other states?
Our senior citizens and our poor don't have adequate health care?
Violent criminals walk our streets because our prisons are full?
Our college students and their families pay higher tuition than their regional peers?
Our highways are more dangerous than those of our neighboring states?
Our mentally impaired citizens have to live far away from their families?
Our economic development and quality of life are drastically hindered as
progressive companies, as well as our best and brightest young people,
move to states that have solved these problems and present more opportunities?
If you would vote "no" because you think your taxes are going up beyond
affordability, here is the truth. More than half of the state's families will see
their taxes go down. Those who do see increases will see that they are
modest and still put us at some of the lowest levels in the nation.
Don't be fooled by sensational ads on television that intentionally mislead
us into thinking we will see sharp tax increases. This is simply not true.
Those expensive TV ads, which often cost $1,000 or more for a 30-second
commercial, are purchased by large companies and individuals -- many of
them from out of state -- who own vast amounts of land and for years have
enjoyed paying very low taxes.
In fact, they pay far lower taxes than you or I pay on our homes. Truth is,
they benefit from our state's bounty but want working families to pay the
lion's share of the taxes.
If you're thinking about voting "no" because you think the new tax reform
may be bad for the economy or for business, consider this: Almost every
local Chamber of Commerce in Alabama has endorsed this tax plan as a
way to generate new business interests in the state. This will be
accomplished by improving our schools, our health care system, our
prisons and the safety of our highways.
Likewise, most major banks and most of our largest in-state corporations
have endorsed the plan.
The state's newspapers have signed on for the plan, as has the Business
Council of Alabama, representing the core leadership of Alabama
business. Some would have you believe that low taxes equate to a
business environment of more jobs and higher pay. They attempt to
support such "pseudo-intellectual" arguments through the work of a
nondescript organization from Boston called the Beacon Hill Institute. In
truth, if low taxes drive the economic engine, then Alabama should be
leading other states rather than coming in dead last in almost every measure.
If you're thinking about voting "no" for this plan because it was proposed
by someone of a political party other than your own, consider this: Gov.
Riley has put his political future on the line proposing this plan over the
objections of many within his own party, because he believes it is the right
thing to do. The plan received bipartisan support in the Legislature and is
currently endorsed by a wide-range of Alabamians from all political
parties, economic levels and racial, ethnic and religious backgrounds.
Out-of-state news media who have no stake in this matter are calling Gov.
Riley one of the most visionary leaders in the nation because he is trying
to avoid a crisis such as that in California. Time magazine called him
"Alabama's most courageous politician," and The Washington Post
commended his "courage" and his "realism."
No one likes to pay higher taxes; however, we all know that we can't hope
to grow in our personal life, profession or business without sacrifice and
investment. Short-term sacrifice brings long-term gain if we invest wisely.
I encourage people to search their consciences and ask one simple
question: Will this tax reform and accountability plan make Alabama a
better place in which to live, work, rear our children and retire?
To me, it is clear that Gov. Riley's plan is right for Alabama.
Gordon Moulton is president of the University of South Alabama. His
e-mail address is email@example.com.
"Current use reform overdue"
Mobile Register, 09/03/03
YOU'VE GOT to hand it to opponents of Gov. Bob Riley's tax-reform plan.
Their commercials are creative, if not entirely truthful.
One of the newest ones, for example, attempts to persuade voters that if
they vote "yes" on the plan, then small timber growers and small farmers
will have to sell all their land. Worse, according to the ad, Alabama's
forests consequently will be overrun by development. And all because
Gov. Riley is attempting to reform a provision in the law known as "current use."
What the ad doesn't say is that current use unfairly favors those who own
huge tracts of land in Alabama and do not pay their fair share of property
taxes. The ad also doesn't mention that the Public Affairs Research
Council of Alabama says that only about 500 agricultural landowners in
the entire state -- less than 2 percent -- would lose current-use status on
part of their properties.
And, too, the ad fails to mention that the governor's tax-reform plan would
leave current use in place for landowners with fewer than 2,000 acres.
Of course, if the ad did mention those things, then voters might remember
that the current use law has been perverted over the years. They might
recall that what started out as a law intended to protect farmers when
surrounding tracts of land became more valuable now gives wealthy
landowners unconscionable tax breaks while local schools and
governments suffer from inadequate funding.
And then, they might come to understand that what Gov. Riley is trying to
do is ensure that everyone pays fair taxes on the fair-market value of
property they own.
If the people behind this and other misleading anti-reform ads were really
unlucky, voters might then decide to study the governor's plan, at which
time they would realize that it will equalize the tax load in Alabama,
whereas existing laws unfairly burden the working poor.
In fact, voters who look at Gov. Riley's proposal and the opposition's ads
with a critical eye will see the wisdom in voting "yes" next Tuesday.
Clearly, the plan will bring about much-needed reform.
GEORGE TALBOT, "Economic impact difficult to figure."
Mobile Register, 08/31/03
Economists and others paid to analyze fallout have bickered all
summer over whether the plan would be good or bad for Alabama
By GEORGE TALBOT
Take $1.2 billion from the wallets of Alabama taxpayers, and some fear it
will be felt at the grocery, the restaurant and the department store,
sending ripples across the state's economy.
Pour that money right back into Alabama schools, senior centers and
highways, others argue, and that's bound to improve the fortunes of a
Of all the potential consequences of Gov. Bob Riley's $1.2 billion tax
reform plan, its impact on the Alabama economy is perhaps the most
difficult to predict. Economists and other academics paid to analyze the
fallout have bickered all summer over whether the plan, scheduled for a
statewide vote Sept. 9, would be good or bad for Alabama business.
Supporters argue the plan would create a more equitable tax system and
stabilize the state's budget, ensuring the kind of government services and
infrastructure essential to attracting new industry.
"I deal with companies all the time that are making location decisions.
They don't want high taxes, but they don't want the lowest taxes in
America, either," said David Bronner, who manages the $24 billion
Retirement Systems of Alabama pension funds and who has campaigned
in favor of the plan.
"They want to be able to attract good people to work for them, so it's
important that they're located in an area that has a good quality of life. If
you want it, you've got to pay for it."
Opponents of the tax increase tend to espouse "supply-side" economics,
which contends that reducing tax rates will stimulate investments and
economic growth. Raising taxes, they argue, will stifle an already-troubled
"The truth is that the governor's net tax package very probably results in
the loss of 30,000 jobs as more businesses and people scramble to pay
these taxes," said Wallace Malone, chief executive of SouthTrust Corp.,
Alabama's biggest bank.
The debate has spawned at least two math-heavy, densely-worded
economic studies, which contradict each other.
The first, published in May by Suffolk University's Beacon Hill Institute,
figured that Riley's proposed tax increases would immediately cost the
state more than 24,000 jobs, plus thousands more over the next five years.
The vast majority of Alabamians "will be worse off because of these tax
changes," the Boston-based think tank concluded in its 45-page study,
commissioned by the anti-tax Alabama Policy Institute.
The Beacon Hill study was swiftly and loudly denounced by the University
of Alabama's Center for Business and Economic Research, which in early
August cranked out a competing study that claimed the plan would create
more than 10,500 jobs.
So which is correct?
"It's one of those issues where reasonable arguments can be made by
both sides," said Kimberly Key, an Auburn University accounting
professor who has studied the plan in detail, and who said she will vote for it.
"The only thing you can say for sure is that these studies, depending on
the assumptions they make, can reach just about any conclusion they want."
Others said it is almost impossible to determine whether Riley's tax plan
would harm or help the state's economy.
"It's extremely, extremely complicated," said Keivan Deravi, an Auburn
University-Montgomery economics professor.
"The impact is exaggerated in both studies," Deravi said. "The answer is
somewhere in the middle, but it depends on so many variables that it
would blow your mind if you thought about it too much. I don't know how
anyone could do it, and I've been crunching numbers for 20 years."
Critics point out that the Beacon Hill study was published a month before
state legislators completed work on the tax reform bill, so many of its
calculations were based on little more than guesswork. They also claim
that Beacon Hill inflated its projected job losses at the behest of tax opponents.
"They either started with erroneous information, or they've done
results-for-sale research," said Gene Stanaland, founder of GSE Inc., a
Montgomery-based economics and management consulting firm.
Stanaland, a highly-regarded lecturer who is known as the "Will Rogers of
Economics," said the Beacon Hill study essentially has been discredited by experts.
"I can't speak for the (University of Alabama) study because I haven't
studied it, but I can say that at least they were much more up front about
their methodology and the numbers they used," he said. "You can agree
or disagree with their conclusions, but at least they're open about how
they arrived at them."
A key sticking point in the Beacon Hill study is its "baseline" assumption
that, without any tax changes, employment in Alabama will increase at a
rate of about 4 percent annual ly. Extending that over the next five years,
Beacon Hill figured Alabama jobs would grow from 2 million currently to
2.4 million by 2008.
Riley's tax plan, however, would slow job growth to less than 1.2 percent
annually, Beacon Hill said. Projected over five years, the difference is
about 28,000 fewer jobs.
The problem with Beacon Hill's study, tax proponents said, is that its
"no-tax" projection of 4 percent job growth is well above the state's
historical average. Alabama jobs have grown at an average rate of about
1.7 percent annually over the past 20 years, according to statistics from
the Alabama Department of Industrial Relations.
"We'd be thrilled if their 'no tax' projections were correct," said Carl
Ferguson, director of UA's Center for Business and Economic Research.
"But the fact is their forecast is so extraordinarily beyond anything
Alabama could expect to realize that it is meaningless. They used a very
reputable methodology. The problem is they based it on incorrect data."
Beacon Hill defended its study and said that even if its projections are
reduced, the state still stands to lose thousands of jobs and millions in
potential investment by businesses.
"The bottom line remains the same," said Beacon Hill executive director
David Tuerck. "This tax increase would have a substantial negative
impact. No amount of spin, coming as it does from a tax-dependent state
institution, can change these facts."
The UA's own tax study predicted job growth under Riley's plan of about
0.5 percent, or about 10,500 new jobs over the next four years. That
estimate, however, has been criticized by both tax opponents like Tuerck
and tax supporters like Auburn-Montgomery's Deravi.
Deravi said that there's no way a $1.2 billion tax increase won't dampen
the state's economy.
"By their logic, why not dou ble the increase to $2.4 billion and get twice
as many jobs?" Deravi said. "I believe the plan is good, but you've got to
Riley, a Republican and former Congressman, confessed a lifelong allergy
to taxes but has said he inherited such a severe financial crisis as
governor that he had no choice but to ask for money.
Any short-term pain, he has said, would be more than offset by long-term
benefits from investing in schools and infrastructure.
"Alabama can be a state were our children get the skills to compete,
where they get good jobs and where they have a better opportunity to live
and raise a family," he said.
Riley's plan has been endorsed by groups including the 5,000-member
Business Council of Alabama, trade associations representing retailers,
homebuilders and hospitals and more than 100 chambers of commerce,
Opponents include the Alabama Farmers Federation, forestry and timber
groups, some banks and the National Federation of Independent