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Senate Targets Use Tax for Budget Solution

 

By Susan Britt
Alabama Political Reporter

MONTGOMERY—On Monday, August 3, President Pro Tem Del Marsh (R-Anniston) and Senator Greg Reed (R-Jasper) held a press conference outlining the Senate plan for the Special Session.

Marsh expressed his expectations for this Special Session saying, “What I hope we can do, is come up with a plan that meets the Governor’s expectations, in terms of his bottom line that he needs to feel comfortable with the General Fund, and to get there without raising taxes on the people of the State.”

He said, the main objective of the Senate during this Special Session, is to pass the budget without a need for calling another special session.

Marsh stated that while there are two bodies, the House has been talking about revenue raising issues that he doesn’t feel the Senate will pass, and he has relayed that sentiment to Speaker Hubbard: “We are pretty confident, based on the conversations we have had in the Senate, that we can put together a package that will get together all the parties eventually on the same page.”

All over the State House, one-single-phrase was used more than any other—Use Tax. Marsh is proposing to move the Use Tax from the Education Trust Fund to the General Fund. He said that by doing this, the General Fund would have its first growth tax. Lacking a growth tax in the SGF has been a stumbling block in Alabama legislative budgeting efforts for many years.

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Marsh said that even though the two bodies are not in agreement in many areas, they seem to be in agreement on moving the Growth Tax and the passing the Business Privilege Tax proposal. He said, the main concern with making such a move is how to “backfill” the money to the ETF. By shifting the $225 million, the Use Tax would  “put a big dent in the needed revenue.”

By combining three proposed solutions, the Use Tax, Medicaid tax, and Business Privilege Tax, Marsh said it would create $275 million needed to solve the General Fund problem.

The overall affect on the ETF of moving the Use Tax is estimated at three percent. “Since the ETF has already passed [for this year], the shift of the Use Tax will not affect it.” He said the ETF still has the remaining growth taxes, i.e. sales tax, so it would not be lacking for growth revenue.

As to “backfilling” the ETF, Sen. Reed said, “I think there will continue to be robust debate on the question. If there is backfill, what is the definition of that? What does it look like? How does it work?”

Marsh said he felt like there was “pretty much” a consensus among legislators concerning the Use Tax proposal, but said he could not guess as to the degree of shift it would take.

When asked about a cigarette tax and the removal of the FICA deduction, Marsh said that when he asked the question in the caucus meeting on Monday, the vote was a count of only eight.

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DIG DEEPER