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Public Hearing Held on Raising Taxes

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

For over three months, Alabama Governor Robert Bentley (R) has been lobbying the State legislature to raise taxes on the people of Alabama.

On Tuesday, May 5, the House Republican Caucus voted in favor of a much more modest package of tax increases along with a Rep. Mike Hubbard (R-Auburn) backed plan to give the Poarch Creek Band of Indians a gambling monopoly in the State of Alabama. The tax increase proposals were debated by supporters and opponents in a rare Tuesday public hearing in the House Finance and Taxation Committee chaired by Rep. Steve Clouse (R-Ozark).

Mental health advocates spoke in favor of raising taxes. They said that 1 in 4 adult Alabamians suffer from some form of mental illness and the Department of mental health, “Can not have less money than we have now.” 

State Representative John Knight (R-Montgomery) said that the State’s General Fund budget has a shortfall of $270 million to level fund State agencies at last year’s levels.

Roger Serveline with Enterprise Rental cars. He said that Enterprise employs 1100 Alabama residents: “We oppose the 33 percent tax increase.” 

It is a myth that rental car customers are mostly rich travelers from out of state. 66 percent of rental car customers are Alabama residents. A 2010 study showed that 25 percent make less than $40,000. The rental tax also would apply to leasing vehicles. The share of new cars that are leased has doubled. Many businesses lease or rent vehicles particularly trucks as needed rather than have dollars tied up in the capital expense of owning.  Serveline warned that raising the rental tax would have a negative ripple effect across the economy. Alabama already has much higher rental car taxes than neighboring states because unlike those states Alabama lets local governments apply their own taxes to leasing vehicles. This would bring the taxes to10 percent in some jurisdictions.

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“Where is it going to stop?”

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Mr. Sizemore spoke on behalf of the Alabama Trucking Association. Sizemore said that 20 percent of large truck purchases are lease agreements. This tax increase will have enormous gravitational pull to other states where leasing a new truck tractor will be much less.

Wanda Laird with the National alliance for mental illnesses said that not passing taxes and instead cutting the Department of Mental Health budget would have a devastating effect on the mentally ill.

Tom Holmes, who is the Chairman of Government Affairs Committee for ARK of Alabama said that they support any legislation that brings revenue to the General fund. We serve 6000 individuals each day and would lose some of those people with budget cuts. 

State Representative Patricia Todd (D-Birmingham) spoke on behalf of her bill HB572 which raises the tax on cigarettes by 25 cents a pack, down from her previous bill which raised 42 cents a pack and the Governor’s proposal which would have raised the tax by an incredible 85 cents per pack.

Christy Cain, the Chair of Alabama Healthy Changes and Executive Director of Alabama Children First said that raising tobacco taxes would be a beneficial step for Alabama. The average Alabama does not recognize the dire straits that Alabama is in. She however was concerned that the tax increase was too small. Children First and Healthy Change are worried that this would only generate $55 million a year and a 25 cents is not a deterrent to encourage smokers to quit and teens not to start. If we could reduce the number of smokers it would make Alabama a better place to live.

Kimble Forester with Alabama Arise said that the group has changed our position. We were opposed to it because it is a regressive tax; but have changed our position because of the health benefits. While the tax will hit the poor the hardest they will benefit the most from the lowered mortality by not smoking. They do prefer a 55 cent tax increase because it would give adults another reason to quit and prevent teens from starting.  The increase, “Needs to be big enough for sticker shock.” 

Economist Patrick Fleenor said that he has done an enormous amount of research on cigarette taxes. Recent state cigarette tax increase didn’t get the revenue they expect. New Jersey and Hawaii have both lost revenue from cigarette tax increases. This is due to an increase in ross border shopping and smuggling. Consumers move their shopping habits across the border to the state with the lowest taxes. 

Ricky Jones a wholesale distributor from Andalusia representing the Wholesale Distributors Association said that Alabama is the only state in the region to allow local taxes to be levied on top of the state tax. There are 399 tax jurisdictions on cigarettes in Alabama. That is not like any other state.  Ozark adds 20 cents to every pack. If you add another 25 cents consumers will drive to Georgia and Mississippi. Florida has higher cigarette taxes now and tons of people come into Alabama from Florida because it is $10 a carton less here. We will lose that if we raise the taxes.  “86 percent of the people who smoke in Alabama make less than $15,000 a year.” There might be a health benefit from raising taxes but a penny tax on Coca Cola and Frito Lay would do more good by decreasing diabetes.  It is foolish to rely on taxes from a source that will go down in revenue every year from now on as fewer people smoke.

A representative of the Petroleum and Convenience stores Association said the 250 different companies we represent run 4000 stores in Alabama and cigarettes are the largest product we sell. Cigarettes were 36.4 percent of sales in 2010 that has dropped to 32.5 percent of sales in 2014. That business is very price competitive. They will drive across town to save money. Many stores will not be able to survive if this passes.

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