COMMENTARY ON THE TAX INCREASE REFERENDUM

Several friends and readers have asked me to post my analysis of the Alabama constitutional amendment which is to be voted on September 9. There are so many issues and so much to cover, from so many different levels and types of analysis, that one scarcely knows where to start. However, I have been collecting material on the subject since the matter first arose, and I believe I have a perspective which may add to the general debate. Between now and September 9, I will be putting downs some thoughts which I hope to be of value.

Perhaps, the shear political crudeness and cynical approach of Billion Dollar Bob in structuring his proposal is the best place to begin. The proposal which the voter will see on the ballot reads as follows:

"Proposing an amendment to the Constitution of Alabama of 1901, establishing the Alabama Excellence Initiative Fund which may be used to fund programs including, but not limited to, the furtherance of excellence in public education, college scholarships, health care benefits for senior citizens and job training programs to attract new high paying jobs and otherwise provide for distributing state tax revenues; to adjust income and property taxes; to establish the General Fund Rainy Day Account; to provide for the replenishment of the General Fund Rainy Day Account and the Education Trust Fund Rainy Day Account."

There is not even a mention what parts or sections of the constitution are to be amended or what the document says today and what it will say if the measure is adopted. No matter that most of the issues being discussed in the media about the governor’s plan are not part of the constitutional amendment being voted on. For example, the proposed amendment would raise the maximum income tax rate from 5% to 6% and would change the dedication of new proceeds from the educational trust fund to the general fund (by a complex formula which was approved by the teachers’ union). But it gives no tax relief for the poor. This is in companion legislation which is subject to change at the whim of the legislature (and is vastly over-stated in any event).

Much of the recent media discussion (and the ads from the proponents) concerns a supposed “tax reform” and even a “middle-class tax cut,” but these concern proposed changes in the tax code which the legislature was and is perfectly free to do on its own without changing the constitution.

In any event the proponents first over-estimate the percentage of incomes the “poor” are currently paying in state taxes and focus on how awful this is; then they point to the fact that under the proposal these taxes will be lifted by raising the threshold of exemptions. But nowhere do they quantify the plain fact that these tax-cuts are trivial compared to the increases which are to be borne by everybody else.