Siegelman raises taxes while Bush cuts them
In Alabama, the economy is faltering and we have an apparent crisis in funding our education system. One feeds the other. When the economy slows, the state treasury takes in fewer tax dollars to pay for the state's expenses, including education. Education funding and the economy go hand in hand.
Gov. Don Siegelman, however, apparently does not recognize this fact. He has called a special session of the legislature to deal with the education-funding shortfall, but he is ignoring the economic slowdown.
In reality, his remedy for the education funding shortfall n raising taxes — will have unintended consequences on the economy in Alabama. People are already losing jobs by the thousands in Alabama because their employers are cutting back as a result of the recession. Placing more tax burden on these employers will have a devastating effect on many small and large businesses, which will result in more layoffs.
President George Bush has taken a different approach to the sagging economy. He is proposing to stimulate the economy, and give business through out America a boost, by cutting taxes. This in turn, keeps people working.
In his weekly radio address to the nation Saturday, Bush said, "I have proposed we lower taxes on employers who buy new equipment to expand their business, and hire more people. We should reform our tax laws so that employers don't pay more taxes as their profits shrink".
Governors in other states are following the President's lead and are looking at tax cuts to get the economy going. Even though we have a need for more money in education, Siegelman's proposal to raise $160 million a year in taxes is not the direction we should be going.
The most devastating aspect of Gov. Siegelman's proposal is his proposed increase in the minimum business privilege tax from $15,000 a year to $2 million for companies who have made more than $2.5 million in profits or who have a net worth of more than $25 million.
I have met with business leaders in the last couple of weeks who say they will have to close their operations in Alabama if Siegelman is successful in getting the legislature to implement this tax increase. These are not low wage "cut and sew" jobs that will be leaving Alabama if this extraordinary high tax is imposed on their business.
Jobs that will be lost are highly paid professionals and researchers who make a significant contribution to the economy. We must not run them out of the state, and suffer the consequences, for some perceived short-term gain in education funding.
The problem with adequately funding education in Alabama is real and we need to come up with real solutions. There are short term solutions to get us out of the "fix" we are currently in and there are long term solutions to keep us from getting in this "fix" again.
The short-term solutions include cutting administrative overhead, waste and duplication in education, cutting non-educational expenses out of the education budget, cutting out all special pork funds which are buried in the education budget for only a hand full of legislators, transfer the $49 million surplus in the general fund to the education fund and close tax loopholes on out of state businesses which business leaders have estimated would bring in $78 million a year.
If the above short-term solutions were implemented we would more than offset this year's education funding shortfall of $160 million without raising taxes. Making these changes, however, does not address the long-term problem we have in budgeting and funding education in our state.
Looking long-term, we must have an independent study of Alabama's tax code to identify all of its pitfalls and inequities and act responsibly in taking the necessary corrective action. We cannot continue to let our tax code unravel from one crisis to another and respond by putting on another band-aid.
Secondly, as Republicans have proposed repeatedly in the legislature, we must set aside funds each year to be used in times of economic downturn like we are now experiencing. Most states have "rainy day" accounts like this to get them through difficult times, but the Democrat leadership in the legislature has killed this legislation year after year.
Finally, the legislature must discontinue its practice of budgeting more for education than we collect in taxes during the preceding year. In other words, if the state collects $4 billion in education tax dollars this year, we should not budget to spend more that $4 billion on education next year.
The average family in Alabama has a savings account that they have built up in order to pay for unexpected expenses. They also do not spend money at a rate higher than their prior year's income. So, why should the state operate any differently? The answer is obvious. We shouldn't. The legislature must change the way we manage the state's finances and this special session is a good place to begin.
Bill Armistead is a state senator for District 14 in North Alabama. This is a guest column which is running in place of Sonny Callahan.