Alabama Has the Cheapest Taxes in the Nation

"I'm just not a big believer in the redistribution of wealth and taking from some and letting the government spend it," said Hubbard, who chairs the state Republican Party. 

 "If we're going to be very conservative in asking people to pay taxes, then we also have to be very efficient at using their money." - Jim Williams, executive director of the Public Affairs Research Council of Alabama

Alabama Pensions Chief Bronner Sees State Financial Crash

February 25, 2010

The Birmingham News - Alabama pension fund boss David Bronner said the state's lack of public revenue threatens its future as a productive and orderly economy, while Middle East tensions might drive oil to $300 a barrel this year.

The head of the Retirement Systems of Alabama, the pension plan for 300,000 active and retired state workers, said it is too late to save the state budget by reducing expenses.

"You can't cost cut your way out of General Fund problems when you have always run it on the cheap," Bronner said. "Government will cease to function, and that means courts, education, youth services and public safety."

Bronner has said before that Alabama taxes will have to rise substantially by 2011 to avert a financial meltdown, probably on real property, a theme he cited during a July 2009 speech in Tuscaloosa.

Alabama has the lowest personal and business taxes in the country, even when adjusted for household income, according to the U.S. Bureau of Economic Analysis. Advocates of low taxes say that stimulates business investment; opponents say the rich benefit while everyone else suffers with poor schools, cracked roads and long lines at the Department of Motor Vehicles.

Debate aside, Bronner's most recent alarming predictions came last week at a meeting of the Birmingham Bar Association in Prattville. It was attended by private lawyers, government prosecutors and state judges.

"As a group, they aren't accustomed to people telling them how things really are," Bronner said in an interview Wednesday.

He admitted that his optimism is low. When asked if the rate of decline he envisions means Alabama devolves into a Third World wasteland, he replied: "Yes. Only with Third World countries, the expectations aren't very high to begin with."

Time is short, Bronner said. While opinions vary, the gloomiest projections out of Montgomery are for spending in the next fiscal year for both the Education Trust Fund and the General Fund to outstrip available money by $1 billion.

Don't count on gambling or electronic bingo, Bronner said, to pull any financial miracles. Both are under heavy discussion during the current legislative session in Montgomery. Bronner said it's like arguing about getting a new roof on the house as a tornado bears down.

"Gambling and bingo are nickel and dime," he said. "They won't solve the problem, but they sure divert attention away from it."

Schools may close

Trouble will happen by the time school starts, said Bronner, who has led the RSA for 37 years. School district superintendents will start cutting programs, class offerings and teachers. Entire schools will close. Thousands of teachers will be released, he said. State troopers will stop enforcing speed laws and contract disputes between businesses will take forever to wend their way through a deserted court system strapped for judges, clerks and stenographers.

"Maybe the troopers can stand by the roadside and wave," Bronner said. "If you stop, you get a ticket, if not, see you later."

Bronner also said the global economy is threatened by Iran's nuclear ambitions in the Middle East. He said unless other nations become satisfied Iran will not pursue a nuclear weapons program, Israel will attack. He said that will force oil to $300 a barrel, from less than $100 now, and cause world stock markets to plunge.

"To me, Israel has no choice, they will have to strike if there is no agreement," Bronner said. "The people in Iran are smart and educated, but they have never had a leadership they could rein in."

The economy won't be able to handle it, Bronner said.

"With oil at $300 a barrel, the U.S. economy sputters to a halt and the stock market is crushed."

Bronner said similar budgetary conditions prevailed in Alabama during the 1970s, when he first took over at the agency which invests money to pay for the pensions of public employees. No one listened then, he said, and nobody paid any price for it. Shortly after, massive oil discoveries in the Gulf of Mexico sent mounds of cash cascading into state coffers.

"Hey, we might get lucky again," Bronner wisecracked. "They might find uranium and gold under the Black Warrior River."

Alabama Boasts Lowest Taxes in Nation

November 1, 2009

The Birmingham News - Alabama residents and companies paid less in taxes than people and businesses in any other state in the 2007 fiscal year, based on total state and local taxes paid per resident, according to a review of U.S. Census Bureau reports.

Even taking into account that incomes in Alabama were lower than in most of the country, people and companies here had a relatively low tax burden. Among the 50 states, Alabama had the third-lowest average state and local tax collections per person as a percentage of personal income.

Relatively low taxes help attract businesses and retirees to the state, Gov. Bob Riley said.



But teachers' lobbyist Paul Hubbert said Alabama's relatively low taxes also limit governments' ability to provide good schools, roads and other services.

Alabama's state and local governments collected an average of $2,909 in taxes per person in fiscal 2007, according the Census Bureau's most recent report on state and local taxes nationwide and its state population estimates for July 2007. Taxes tallied by the bureau included personal and corporate income taxes, sales taxes, fuel taxes and property taxes.

For the country, the median state and local taxes collected per person was $4,011; it was more in 25 states and less in 25 states.  Alabama's state government and city, county and other local governments collected a total of $13.46 billion in taxes in fiscal 2007. That was $1,102 less in taxes per person than the 50-state median. If Alabama governments had gotten the median amount per person, they would have had an additional $5.1 billion. 

Matter of pride
 
Riley said having relatively low taxes is good, "because it really does make a difference when we have people that are retirees moving into the state, when you look at different businesses that are looking at coming into the state."

"Taxes will be a major part of that decision," he said.

State Rep. Mike Hubbard, R-Auburn, said,

"I think that's something we ought to take pride in, that we have low taxes."

"I'm just not a big believer in the redistribution of wealth and taking from some and letting the government spend it," said Hubbard, who chairs the state Republican Party.

State Sen. Lowell Barron, D-Fyffe, said Alabamians like low taxes. 

He also said relatively low taxes are a big reason Democrats still control Alabama's Senate and House of Representatives, while legislatures in several Southeastern states, such as Florida and Georgia, are controlled by Republicans.

"I think it's because we've been conservative and very prudent about raising people's taxes," said Barron, who chairs the Senate's agenda-setting Rules Committee.

But state school Superintendent Joe Morton said there's a drawback to relatively low taxes.

"It's hard to be No. 1 in education if you're No. 50 in spending capability," Morton said. "Everybody wants us to be better in education, and it's hard to do that with very, very limited capital."

Hubbert said Alabama's tax ranking puts the state at a disadvantage in providing education, health care, roads, police protection and other services, factors he said many companies consider when scouting office or plant locations.

"Probably it's not too impressive to some of the major corporations looking for a place where the quality of life might be as important to them as cheap wages," said Hubbert, who is executive secretary of the Alabama Education Association.

Is it enough?
 
Alabama's average state and local tax collections per person also were lowest among the 50 states for fiscal 2005 and 2006, according to earlier reviews of census reports. 

In fiscal 2007, two of Alabama's neighboring states came close. Mississippi collected $2,989 per person, ranking 49th. Tennessee collected $3,005 per person, ranking it 48th. Georgia collected $3,481, ranking it 34th on the list; Florida collected $4,009 and was ranked 26th. 

Riley was asked if state and local governments in Alabama had enough money to adequately provide services they should be providing.

"I think, absolutely, you can provide most all of the services," he replied. "The debate is, how much is enough?"

Asked if taxes were adequate to provide services he wanted Alabamians to have, Riley replied, "Yes."
State Rep. John Knight, D-Montgomery, who chairs the House Government Appropriations Committee, countered that in his view, governments in Alabama do not collect enough taxes to adequately serve the residents.

"I think we're lacking in terms of education. And as we attract industry, I think that we've got to provide more for infrastructure: roads, bridges, health care. Across the board, I think all of that has to be in the equation," Knight said.

'Less to work with'
 
Alabamians in 2007 had an average personal income of $32,404, which ranked 42nd among the states, according to the Census Bureau and U.S. Bureau of Economic Analysis. The national average was $38,611. 
 
Even after taking that lower income into account, people and companies in Alabama paid a smaller share of income on taxes than those in all but two other states. 

In Alabama, average state and local tax collections per person equaled 8.98 percent of the income per person in fiscal 2007, a lower percentage than in all other states but South Dakota, which had 8.87 percent, and New Hampshire, 8.71 percent. 

The 50-state median was 10.65 percent. 

Jim Williams, executive director of the Public Affairs Research Council of Alabama, a nonpartisan think tank at Samford University, said Alabama's relatively low taxes present a challenge for governments trying to provide the services people expect.

"Our governments have less to work with than other state and local governments in America," Williams said. "If we're going to be very conservative in asking people to pay taxes, then we also have to be very efficient at using their money."

"My general impression is, we're not there yet," he said. "We have work to do."