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Press Release

    Higher Taxes Would Harm Alabama

    08/20/2003

    On August 20, 2003, Citizens for a Sound Economy (CSE) released a report that shows Governor Bob Riley’s $1.2 billion tax increase plan will cost Alabama jobs, investment and income. The CSE report pulls together information from many different sources to create a complete picture of how the tax hike will effect the state of Alabama.

    EXECUTIVE SUMMARY

    On September 9th Alabama’s voters will decide to either pay $1.2 billion more in taxes to increase educational spending and cover a $675 million budget deficit, or to let Montgomery’s politicians find ways to spend more wisely. Spending in 2003 was $980 million higher than in 2002.

    Everyone in Alabama will pay for the $1.2 billion hike—which comes to $600 per working person. Income taxes will be lower for a few, but they will lose these savings to higher taxes almost everywhere else, like on homes, cars, boats, oil, cigarettes, and services. Only the 24,000 workers who will lose their jobs are sure to pay lower taxes. Some companies have already said they would take new factories and jobs to other states. Investment in Alabama will drop by $331 million and disposable income will fall by $2.3 billion.

    As Riley argued himself, schools need reform, not more money. The past 30 years have seen a 180 percent increase in spending, a 42 percent increase in teachers, and a 50 percent increase in principals—all to educate 14 percent fewer students. The average teacher salary in Alabama is $39,268—16th highest in the US when adjusted for cost of living. The average worker makes $32,812. Alabama could save $87 million by out-sourcing much of the schools’ “non-educational” services, as many states do, which now cost $807.8 million per year.

    The tax hike plan is so extreme, either the constitution will have to be changed because cities like Birmingham would be over the legal tax limit, or local taxes will be cut, costing the city $3,495,295 and its schools $2,564,139.

    Other states are avoiding raising taxes by reducing excessive spending. This paper outlines 10 money-saving options for Alabama. If Alabama avoids this pro-growth option it will face the same problems as those states who raised taxes during the recession of the early 1990s: fewer jobs, more budget problems, and slower growth.

    Read the full report: Adobe .pdf format       HTML format