We've been talking a lot on here recently about multiple financial crises that are looming over several states. I find it encouraging that here in Alabama our Republican governor is making one of the best appeals I've seen for increasing taxes as a possible solution rather than more tax or funding cuts. Mind you, I completely disagree with the taxes he's targeting and I disagree with almost all of his other positions but at least he's trying to smack the "No new taxes!" people in the face with reality.
Gov. Robert Bentley, who discussed the crisis facing Alabama's General Fund and his solution to the problem, told north Alabama business and community leaders that serious state cuts are on the way if lawmakers don't pass his proposed $541 million tax package.
1) The morgue in Huntsville will close. ...
"It's going to take a long time to get an autopsy done and it may take a year to get a death certificate," he said. "When you delay all of those type things, that affects you personally."
2) The Department of Human Resources will suffer. ...
Bentley said 400 adults in need of day care will have to go to nursing homes and 30,000 children will be without food stamps.
3) There will be significant changes to the court system.... Staffing will be cut at all of Alabama's 67 courthouses, resulting in about 600 layoffs.
"I can tell you lines will be longer and waits will be longer for restitution, child support, divorce -- all of those things that courts deal with every day," he said.
He goes on to list how cuts to the Alabama Department of Environmental Management, mental health treatment, veterans services, the department of conservation and the prison system would affect people in their day to day lives. The article ends with this:
Bentley said it's "easy to dig your heels in and say, 'I will not do this. I will not change my mind. I will not look at the facts. I will not look at what's best for this state. I will not because I signed some kind of stupid pledge 10 years ago that said I will not raise taxes.'"
"Well, I signed one when I ran the first time, but I didn't sign it the second time," he said. " ... It's easy to say no, folks. It's harder to be bold and to look at what the real problems are and try to solve problems."
While the governor is making these appeals, which I applaud him for, the lawmakers are completely against it. They've begun talking about a possible solution that they may put forward next year which is another constitutional amendment, to the the nations already largest state constitution, to completely scrap the current tax code and just go to a flat tax which, of course, would also be considered a tax cut.
Hightower's proposal is a model of simplicity. All an Alabama taxpayer would do is to take the "adjusted gross income" from page one of his federal 1040 tax form, multiply by .0275 – and send it in. No complicated assessments of what's taxable. No 15 pages of state tax forms. No payments to accountants to calculate your state taxes. Whatever deductions (for charitable donations, dependent exemptions, etcetera) you've already taken for your federal returns would already be baked into the pie.
Meanwhile, your overall rate would drop. Rather than paying $500 on $10,000 of taxable income, you'd pay just $275. For most taxpayers (ones without large state deductions or exemptions), it would amount to a significant tax cut. For most taxpayers, it would save significant amounts of effort and time, maybe hours.
But the state treasury wouldn't lose any revenue. By this system's elimination of some $2.8 billion in deductions and special exemptions, the state would still be able to collect its current $3.6 million in individual income-tax revenue even at the lower rate. In other words, it's "revenue neutral," even without (or before taking into account) any "dynamic" effects from economic growth.