By Brandon Moseley
Alabama Political Reporter
The legislature returns from its recess to consider a package of bills designed to greatly expand what Alabamians pay for State government, move money currently for education to the State’s troubled general fund (SGF), and authorizes borrowing $50 million to build a luxury hotel and conference center at Gulf State Park.
Alabama Governor Robert Bentley has been pushing for these massive tax increases since his reelection on a “no new taxes and smaller State government” platform since November.
The Governor’s proposals are aimed at protecting against significant cuts in services in the General Fund, through a combined approach of budget reforms and revenue increases.
State government has let General Fund spending get out of control for years. Governor Bob Riley (R) and the then Democratic Party controlled State legislature raided $110 million from the Alabama Trust Fund (which still hasn’t been paid back) and accepted Obama Administration stimulus dollars to prop up spending at levels well beyond State revenues.
Governor Robert Bentley (R) and the Republican supermajority dominated State legislature avoided rightsizing State government for the past three years by raiding $435 million from the Alabama Trust Fund (which they haven’t paid back). Now the legislature is tasked with paying to continue the artificially high levels of State spending by raising taxes as Governor Bentley wants them to do; expanding legal gambling in the State to increase State revenues as Senate President Del Marsh (R-Anniston) wants to do; or finally rightsize the size of State government to actually fit the revenues the State currently has.
Despite the massive deficit spending, legislators have already eliminated 5,500 State jobs over the last four years and if they pass something similar to the austerity budget passed by the legislature in June (but vetoed by Governor Bentley) there will likely be similar government job cuts as well as prisoner releases, and a cut in Medicaid benefits and other costly government services.
The budget level proposed by the Governor funds most State agencies in the General Fund and provides funding for the implementation of Medicaid and Prison Reforms passed by the Legislature.
The proposals include budget reforms:
The existing Use Tax would be un-earmarked for education and schools and transferred to pay for the SGF. Gov. Bentley wants to un-earmark approximately $400 million from other General Fund agencies to provide State agencies additional flexibility with General Fund appropriations.
The Rolling Reserve Act would be weakened and amended to remove certain restrictions.
The BP Oil money would be spent paying off debts, including the $545 million of Alabama Trust Fund dollars raided over the past six years. The State also owes tens of millions of dollars it wrongly charged the Federal government in the troubled Alabama Medicaid program.
Hundreds of thousands of Alabamians would see their income taxes soar by the removal of the FICA Deduction. Bentley is proposing removing the Social Security tax deduction from the State individual income tax to offset the proposed loss of the use tax revenue in the Education Budget. Taxpayers who do not itemize (approx. 50 percent of Alabama taxpayers) would not be affected.
The wealthy would see much less of an increase proportionally than working people do because for 2015, the 6.2 percent FICA tax is not levied on income in excess of $118,500. The Medicare tax deduction is not affected. The Federal Medicare Tax is uncapped.
Gov. Bentley also wants to remove the deduction on Federal income tax. Hundreds of thousands of Alabamians will pay more income taxes to the State government if this passes.
Changing the Business Privilege Tax so that small business would see their tax eliminated; but increasing the maximum tax and rates for larger businesses.
Smokers would pay more by increasing the tobacco tax by 25 cents per pack. Bentley also wants to tax consumable vapor products.
The Fraud Prevention Act would repeal the tax withholding exemption.
These proposals would raise an estimated $310 million a year for State coffers. Education would lose an estimated $31 million to the General Fund which would balloon to over $1.9 billion.
Recent polling shows that there is enormous across the board opposition to tax increases of any kind. 66 percent of Alabama voters do not want these tax increases. We will find out in coming weeks whether their representatives are going to pass this on them anyway.
The Governor is also asking the legislature to let him borrow $50 million to build his pet project luxury hotel and conference center on the Alabama Gulf Coast.