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Governor To Propose Tax Increases

By Brandon Moseley
Alabama Political Reporter

Alabama Governor Robert Bentley (R) wants more money to spend.  After four years of saying that we should right size Alabama government to fit government revenues, now the recently re-elected Governor wants to grow revenues so that State government can grow and so its leaders can spend more money.

According to original reporting by Brendon Kirby with the Alabama Media Group, Gov. Bentley said in Mobile, “One way or another, higher taxes are on the way in Alabama.”

Gov. Bentley was speaking to State legislators and business leaders at a Mobile Area Chamber of Commerce luncheon.

Gov. Bentley reportedly said, “I’m going to do some bold things, folks.”  Bentley said that he will be responsible for selling this scheme to the people of Alabama.  “It’s going to be my job. They’re going to look at me.”

Most sources estimate that there is a $250 million or less shortfall in the State’s General Fund budget between what the State expects to receive in to the General Fund and what the State’s leaders would like to be able to spend.  Gov. Bentley however says that number is closer to $750 million after the State pays back the money that they previously borrowed from the general fund and currently being diverted from gas taxes and the education fund.

Gov. Bentley refused to use specifics before the legislative session in March.  Instead the Governor will spring his proposals on the public in the budget proposal he sends to the State legislature.

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At the Republican Women of Trussville meeting in January Senator Slade Blackwell said that there are a number of revenue increases being proposed by legislators.

Sen. Blackwell has been polling residents of his districts as he speaks to different groups to see which solutions have the most support.

Sen. Blackwell said that one proposal is raising the state’s sales tax.  A one percent increase in the sales tax would generate an estimated $307 million.

Blackwell said another proposal would be to privatize Alabama’s ABC stores which sell alcohol.  There would be an estimated $75 million upfront windfall from selling the profitable business and savings going forward by not having to provide State health and retirement benefits to those ABC store employees.

Another proposal is to increase property taxes on Alabama landowners and home owners.  Raising real estate taxes could generate an estimated $500 million.  Sen. Blackwell said that he does not support raising property taxes and Gov. Bentley has previously said that he was not in favor of the proposal.

Sen. Blackwell said that some in Montgomery support eliminating the federal income tax deduction.  Alabama is one of only three states that still have this deduction.  Eliminating it would raise an estimated $532 million, but would effectively double many people’s State income taxes.

Blackwell said another proposal would be to remove the home mortgage interest deduction.  This would generate an estimated $200 million a year in new revenues.  A similar proposal would be to eliminate the charitable contributions deduction.  That would produce $174 million a year in new state revenues.  Blackwell said that however would hurt our 401c3 charities.

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Sen. Blackwell said another option is to increase sin taxes on alcohol and tobacco.  That could generate an estimated $125 million a year.  Blackwell said that there is a risk of more criminal activity like moonshining and selling untaxed cigarettes if those taxes are raised too high.

Blackwell said that the most popular proposal in his polling thus far is to pass a State lottery.  A lottery would generate an estimated $118 million a year in new revenue for the State.

Sen. Blackwell said that some have suggested legalizing marijuana.  Joining Colorado as one of the few states to sell legal marijuana could generate an estimated $550 million a year in revenues, but that comes with problems.

Another proposal is to take new state employees out of the state retirement system.  Blackwell said that right now the State guarantees an 8 percent return on the money that RSA invests.  That has cost the state over a $ billion over the last four years.  Blackwell said that new hires retirement funds would instead go to an annuity managed by a company like the Hartford and the private company would guarantee the returns rather than the state.  Blackwell admitted, “There is some risk with that.”

Another option is a pact with the Poarch Creek Indians.  Blackwell said PCI already has two great gambling facilities in the State but a pact would mean more of a Vegas style casinos with roulette wheels and casino games.  We could literally generate $150 million a year.

Sen. Blackwell said that another proposal is to raise gas taxes to generate another $200 million to $300 million, but would that new money go to the roads or to the general fund?

Sen. Blackwell said that legalizing slot machines so operations other than the Poarch Creeks can run electronic bingos is another proposal.

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Sen. Blackwell said enforce the sales tax on internet sales would generate $255 million.  Citizens are supposed to pay the tax when they do their returns but few do.  Blackwell said that some support a federal level requiring all internet sellers to charge the tax at the point of sale.

Blackwell said that other proposals include eliminating the personal exemptions so that income tax dollars increase and eliminating medical and dental expense deductions.

Blackwell said that some legislators have suggested that the state remove the income tax and replace it with a much larger State sales tax.

Sen. Blackwell said that these are only some of the suggestions that are out there.  The legislature, “May not do any of them.”

The Alabama Political Reporter asked Blackwell how raising income tax dollars would help the general fund given that those dollars are earmarked for the education fund.  Sen. Blackwell said that the legislation would have to be written to earmark that new money for the General Fund.

Sen. Blackwell said we have two budgets: the education trust fund (ETF), “Is doing fine.  The problem is the general fund budget is running short.”

Sen. Blackwell estimated the general fund budget hole at: $250 to $350 million.

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The general fund takes in $1.75 billion; but 60 percent of that goes to Prisons and Medicaid.  Blackwell called funding Alabama Medicaid, “The biggest problem we have every year.”  Blackwell said that Medicaid is growing at $100 million every year (the state is responsible for 38 percent of that).

The General Fund breaks down as: $615 million for Medicaid, $389 million for the Departent of Corrections, $104 million for Mental Health, $71 million for the Department of Public Health, and $53 million for the Department of Public Safety.

Brandon Moseley is a former reporter at the Alabama Political Reporter.

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