Monday, December 6, 2021

Tax cuts seem to be everywhere – except in Alabama’s future

  Kansas, one of a handful of states alongside Alabama that still fully taxes the sale of food, recently announced a bipartisan plan to “Axe the Food Tax”. 

  Just before Thanksgiving, North Carolina Gov. Roy Cooper signed a budget into law that will make sweeping changes to the state’s tax code, fully repealing the corporate income tax by the end of the decade and cutting the personal income tax rate by 1.26% over the next five years.

  And the tax cuts that North Carolina just enacted and that Kansas is proposing are not outliers. According to the Tax Foundation, North Carolina became the 12th state to enact personal or corporate income tax rate cuts in 2021.

  So, what did Gov. Kay Ivey and the Alabama Legislature do in 2021, and what could be on the horizon?

  Despite taking more revenue from citizens than ever before, there was no meaningful effort to reduce taxes this year. Instead, the 2021 Regular Legislative Session was consumed by a failed effort to legalize, and of course heavily tax, casino-style gaming in Alabama. Lawmakers also found time to legalize the use and sale of medicinal marijuana in Alabama, which could mean financial windfalls for state government and the chosen few businesses allowed to grow, process, and distribute marijuana in Alabama.

  Given the progress made by other states and Alabama’s failure to pass any meaningful tax reforms this year, surely they are coming in 2022, right?

  If tax cuts are in the cards, our elected state leaders are not talking about them. Most lawmakers seem focused on how to spend money that has already been taxed from citizens or find ways to take even more.

  Just last week, Sen. Greg Albritton, chairman of the Alabama Senate general fund budget committee, said that he expects gaming legislation to be a hot topic when the legislature reconvenes on Jan. 11.

  According to a report from Yellowhammer News, Albritton said that he was hopeful gaming legislation would pass in the upcoming session. And while he said getting control of existing gaming in the state was a driving factor, money may be the biggest motivation. Albritton said, “We’ve got to have some taxing on it. We’ve got to have some benefits on it.”

  It was estimated that the 2021 gaming legislation would have brought in $260 million to $393 million annually, just from a new tax on gaming revenue. Much of that revenue would have, of course, come out of the pockets of Alabamians.

  What are other priorities? Sens. Del Marsh and Bobby Singleton have bonuses for retired state workers and teachers on their minds. Marsh’s pre-filed bill would give a minimum bonus of $300 to retirees. Senate education budget chairman Arthur Orr has indicated support not only for retiree bonuses but another pay raise for the state’s teachers. If those priorities pass, Orr has said that it might be the right time to look at limited tax breaks for retirement age and lower-income Alabamians.

  But surely Gov. Kay Ivey is talking about taking less money from the people of Alabama?

  Not exactly. Last week, Ivey announced a state-sponsored plan to expand electric vehicle use in Alabama. Interestingly, when asked if she would move to an electric vehicle, Ivey said her car is “still in good shape,” but she might consider a change in the future.

  Perhaps Ivey is like many other Alabamians who don’t know much about or have little interest in driving an electric vehicle. According to the Alabama Department of Revenue, nearly five million passenger vehicles were registered in 2020. Less than 3,000 of those vehicles were electric.

  Are these really the major priorities for Alabama citizens? If the recent gubernatorial election in Virginia is any indication, no. After a 12-year drought in statewide elections for Virginia Republicans, Glenn Youngkin was able to win because he focused on conservative principles such as school choice and lowering taxes.

  Exit polling conducted by Cygnal found that the driving issues for Youngkin voters were education, taxes, the economy, and public safety, among others. Electric vehicles and expanded gambling appeared nowhere on the list.

  Few would argue that Alabama is a conservative state. Yet the current tax-and-spend priorities of state lawmakers do not reflect conservative principles. If the governor and the Republican supermajority legislature want to get back to those roots, they need only look to other states for inspiration.

  About the author: Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.

  This article was published by the Alabama Policy Institute.

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