Ellington

In an effort that riveted the attention of the nation and even got Alabama favorable copy on The New York Times editorial page, Alabama's Legislature passed the largest tax increase in that state's history on July 7, 2003. (It's now headed for an up-or-down voter referendum on Sept. 9, 2003.) The act, spearheaded by the state's freshman Republican governor, Bob Riley, was designed to make Alabama's tax code less regressive by shifting some tax burden from the poorest Alabamans to the richest landowners and corporations. The goal: Increase revenues to fill a projected $800 million shortfall in the Alabama budget. Oh—and the governor wants to please God.

So, is Mississippi next? After all, Mississippi also faces budget shortfalls in 2003, and its taxes are far from progressive. But our gubernatorial candidates shy away from any hint of raising taxes, particularly as the election approaches.

Gov. Riley has used biblical terms to make his case, pointing out that the New Testament encourages Christians to care for the poor. Indeed, that's an aspect that seems more widely reported (and fretted over) in national media than regionally. Alabama media, for instance, are squabbling over the details and, in particular, a step that may revalue commercial land for tax purposes, forcing large corporate farms and landowners to increase their tax burden by 500 percent or more.

Alabama's tax system is undoubtedly regressive, meaning poorer citizens pay a higher percentage of their income in taxes than wealthier citizens. According to The New York Times, Alabamians with incomes under $13,000 pay 10.9 percent of their incomes in taxes to the state and their locality; those who make over $229,000 pay 4.1 percent. This is partially because Alabama has a low threshold for when taxes kick in, partly because it allows for a great deal of federal taxes to be written off on state income tax returns and largely because Alabama relies more on high sales taxes and property taxes for its income.

In two reports, Mississippi's own regressive taxation tendencies have come under the microscope. "Mississippi Economic Review and Outlook, June 2003" reports that while Mississippi's poorest families pay 10 percent of their income in taxes and lower-middle class families pay 11.5 percent, Mississippi families in the top 1 percent pay only 5.3 percent of their income in taxes.

Another recent study conducted for the Children's Defense Fund by Mississippi State University professors Charles Campbell and Kathleen Thomas shows that 20 percent of all state tax collections come from families making under $19,000 a year. This happens largely thanks to Mississippi's sales taxes, which disproportionately affect families with lower incomes because they have to pay taxes on alcohol, tobacco and gas at the same rates as wealthier consumers, resulting in a larger percentage of a poor family's income being taken up by taxes. Mississippi has the highest state sales tax, tied with Rhode Island. Lower-income families are hardest hit by sales taxes on groceries, which remain a fixture of Mississippi's sales tax code.

While Riley's plan would attempt to rectify some of Alabama's regressive tendencies by reforming aspects of the income and property taxes, reforms to sales taxes will have to wait. And, Riley's tax reforms include juicy tidbits for conservatives, including a number of concessions from educators and the teachers' union. For instance, under Riley's reforms, school administrators would give up their tenured status in exchange for professional-style salaries and bonuses tied to school performance. Teachers would be forced to pay more of their health insurance costs but would receive incentive pay for choosing to work in under-served schools. The bill also includes a compromise clause that promises no teacher layoffs for one year.

Mississippi gubernatorial candidate Haley Barbour's stated position is that he won't raise taxes, saying: "I'm against raising anyone's taxes. Mississippi already has the highest state and local taxes in the South." That claim, while it doesn't speak to the issue of equity in taxation, suggests that Barbour might alter Mississippi's taxes only under duress. Gov. Ronnie Musgrove has also stated that he is against raising taxes.

Riley cited the plight of Ronald Reagan, who raised taxes in his first term as California's governor, as part of his decision. Reagan, when asked why he chose to raise taxes, said, "I have no other choice." It remains to be seen whether Mississippi's next governor will face similar pressure.

Previous Comments

ID

64009

Comment

Again, I feel as if I never know enough to comment on such difficult issues such as tax plans...but here goes. Even though Alabama and the rest of the South have low property taxes , family - living in Alabama - oppose the tax system fearing the "tremedous" increase in property taxes on their home. (The *typical* suburban home in a cutesy gated community - but that's rant for another day.) The article does mention that landowners will pay more under the new system and I was curious about landlords - will the increase in property taxes for them just be passed down as higher rent to tenants? That was a particular retaliation in regards to lower taxes for the poor....cause we know they'll still be paying those crazy sales taxes as well. Is it really such a lose-lose situation? Somehow I'm thinking, no...but don't ask me to back that up...just yet.

Author

Spurlin

Date

2003-07-25T21:21:08-06:00

ID

64010

Comment

I thought this question was interesting so I dove back into this research. Actually, it looks like there's an exception in the law for residental rental property -- currently, that property is taxed at 20% of its value, and residental property "subject to federal or state regulations that control rental income will remain under 20% assessment for both state and local tax purposes, and the state tax rate for such property will remain at 6.5 mills." (The proposed change for most property is to change the rate to 3.5 mills, but raise the assessed value to 100%. That's where you get a "tremendous" increase.) I don't know exactly what property is subject to federal or state regulations - but I imagine that it *at least* covers low-income and subsidized housing. I don't know if, say, a landlord who owned a million-dollar market-rate rental property would get hit with an extra few grand per year that he passed on to tenants -- that seems possible. The typical suburban family home's property tax is to ramp up to 100% of assessed value by year 2006. On a $250,000 home, currently taxed at $1337 per year, the 2007 amount would be about $1900, according to the Alabama Governor's web site. So, while middle-class residential does take a hit, there's at least an argument that says the changes are bringing Alabama into parity with other states -- a quick look via Realtor.net showed a range of property taxes of $1300-$2100 on $250,000 homes in Madison.

Author

todd

Date

2003-07-28T13:02:48-06:00

ID

64011

Comment

Here's an AP story from today about Gov. Ryan's tax plan: "Riley, a Southern Baptist, says Alabama has taxed its poorest too harshly for too long. According to our Christian ethics, we're supposed to love God, love each other and help take care of the poor," he said. "It is immoral to charge somebody making $5,000 an income tax." http://www.salon.com/news/wire/2003/07/29/alabama_taxes/index.html

Author

ladd

Date

2003-07-29T17:12:35-06:00

ID

64012

Comment

It wasn't even close. Unlikely we'll see any tax increase in Mississippi come out of the 2004 legislative session. Our elected representatives were watching this one closely. "By a 2-to-1 margin Tuesday, Alabama voters crushed his $1.2 billion tax plan. The defeat, which polls predicted for months, cut a deep swath throughout the state. Amendment One, as the plan was labeled on the ballot, carried only 13 of Alabama's 67 counties, according to unofficial returns. Statewide, voters rejected it 67-33 percent. " Riley tax plan goes down 2-to-1

Author

Reader

Date

2003-09-10T09:14:19-06:00

ID

64013

Comment

I sure didn't think it would win -- but this issue isn't going away anytime soon. I think it's amazing that a Republican governor tired to make the arguments that he did. That takes courage, and it got a whole lot of people thinking and talking about regressive taxation than had been before. I'd say we're at least pointed in the direction of a smart solution -- even if it takes a while.

Author

ladd

Date

2003-09-10T10:15:55-06:00