With just three weeks until the start of the new fiscal year, Alabama legislators are scrambling to address the $200 million General Fund shortfall. Governor Bentley is hoping the third time’s the charm as he called for another special session – even though the first two budget discussions ended with a clear message: legislators on both sides of the aisle do not want the massive tax hike.
Governor Bentley, despite promising multiple times to not raise taxes during both of his gubernatorial campaigns and signing the Taxpayer Protection Pledge, has proposed $260 million in tax increases.
In order to raise revenue, Governor Bentley’s main target is tobacco, with a 25-cent-per-pack cigarette tax, and new taxes on vapes and e-cigs. Additionally, Bentley has turned to raising the car rental tax from 1.5 to 2 percent and the car title fee from $15 to $28. Governor Bentley had also explicitly stated that he will be looking to raise the business privilege tax and eliminate the state deduction for FICA taxes. The Federal Insurance Contribution Act, which split the payroll tax evenly between employees and employers, was particularly beneficial for small business owners – and now is under threat as Governor Bentley is looking to eliminate the deduction. Finally, as the Cotton State’s Governor looks for additional revenue, a shake down of nursing homes was proposed with a tax increase that is supposed to generate $8 million.
However, Alabama does not have a revenue problem, it has a spending problem. Instead of increasing taxes, lawmakers would be prudent to cut costs and explore new sources of revenue. State spending in Alabama has already far exceeded population growth and inflation and Bentley needs to take the lead the in reducing runaway spending.
Just last year, Governor Bentley promised “More Jobs, Less Government, No New Taxes,” and had previously assured voters that he understood “when you hurt businesses and you tax business, you’re going to lose jobs.”
Governor Bentley clearly broke a promise he made to Alabama taxpayers that he would not attempt to raise taxes. Additionally, his cigarette tax largely targets lower-income households while his Nursing Home Bed Tax clearly exploits retirement income. It is apparent that Bentley has no problem breaking promises, and once those promises are broken, no qualms about imposing taxes on those who should be taxed the least.
Lawmakers should focus on budget reform and spending restraint instead of increasing the net tax burden on those who can least afford it.