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<p>Thursday, August 28, 2003 12:01 a.m. EDT </p>
<p>Alabama Gov. Bob Riley should worry more about the supporters of his $1.2 billion tax increase than his opponents. The massive tax increase--twice the state's budget deficit--faces voters on Sept. 9. And polls show that it will be voted down.</p>
<p>But the real political damage is coming from those who are supposedly in Gov. Riley's corner. The governor's Policy Director David Stewart said that "The people of Alabama [who are against the increases] are too damn stupid to know better." (He later said he didn't remember making the statement, but then apologized.) That comment was followed up by Charles Blair, president of the Huntsville school board, who called local opponents of the tax increase "morons" and "idiots."</p>
<p>While national attention on Alabama has been focused on the state's supreme court's chief justice's fight to keep a Ten Commandments monument (a battle he lost), the state's Republican governor has been violating a fundamental political commandment of his party--thou shall not raise taxes. </p>
<p>Gov. Riley wasn't always a tax and spend politician. He was once a successful businessman, who was elected to Congress in 1996 as a supporter of then Speaker Newt Gingrich. He served three successful terms and then in 2002 defeated Don Siegelman, the Democrat incumbent. Mr. Riley won that race by campaigning against tax increases and for limited spending. He eked out a 3,120 vote victory.
Once sworn in, Gov. Riley realized he faced a budget shortfall and quickly drank the high tax Kool Aid. Some of his friends blame it on the governor's son, who is a trial lawyer with extensive business ties to supporters of the tax increase. Regardless, Gov. Riley is now pushing, for a simple up or down vote, a complicated plan that includes 19 changes in the tax code. He has already aligned himself with Democrats in the legislature. State teachers' union president Paul Hubbard is endorsing the governor's plan. And last week, his aides privately welcomed news that traveling demagogue and presidential candidate Al Sharpton was in the state urging passage of the tax increase. The governor has also secured endorsements for his plan from some 20 leading black ministers and politicians.</p>
<p>"A Democrat couldn't have done this," says Mr. Hubbard. "It's like a religious conversion on Riley's part." In fact, religion has entered the fray. The origins of the tax plan can be traced to an essay criticizing the stat's tax code for lacking Christian charity by University of Alabama tax law professor Susan Pace Hamill. Gov. Riley admits he's been influenced by Ms. Hamill's work, which has been tagged the "How Would Jesus Tax Us?" approach. </p>
<p>The United Methodist Church, the Southern Baptist Convention, and Chairman of the national Christian Coalition Roberta Combs have all praised the plan. Ms. Combs even called it "a bold and rightful mission." But her visit to Alabama backfired when it became clear she wasn't familiar with the plan's details and the state's Christian Coalition chapter opposed the plan. </p>
<p>The governor's other arguments for the tax increase are as predictable as they are false. He says it will help boost the economy and insists that the state needs the money to close the budget gap and improve public schools. But, of course, the plan doesn't earmark any money for education.</p>
<p>The governor's rhetoric seems to be growing ever more desperate. He compares this fight to JFK's challenge to putting a man on the moon. Incredibly, he promised a crowd of Rotarians in Dothan that the state would have the highest reading scores in the nation within six years, if his plan passed. He told community college employees in Birmingham last month that "By the end of this decade, Alabama will have the best academic services and schools in the nation." </p>
<p>Rejecting his plan, he warned, would result in prisoners being released early, nursing home residents being kicked out onto the street and state police layoffs. He predicted that newspaper headlines would read: "Alabama Continues a Backward Slide." </p>
<p>For all the bluster, the people aren't buying it. The plan is losing in the polls, especially among minorities. And the governor's political base is abandoning him. Two members of his cabinet have resigned in protest and Marty Connors, the Republican Party state chairman, is leading the opposition. Last Saturday, the Republican Party's executive committee voted 122 to 100 to oppose the governor's tax increase. Alabamians just don't believe the claim that tax increases will boost the economy.
"The governor is putting growing government first over growing the economy," says former House Majority Leader Dick Armey, who visited the state to campaign against the proposal. He notes that Suffolk University Economics Department Chairman David Tuerck predicts that implementing the governor's plan in 2004 would cost the state 24,000 jobs and $331 million in business investment. Some 83% of Alabama families would lose ground under the plan.</p>
<p>The battle over the Riley tax package is about far more than the spectacle unfolding in Alabama. "In 1990, the first President Bush broke with his base and raised taxes. He lost re-election, and Republicans in Congress learned you pay a real price for breaking faith on taxes," says Grover Norquist, the president of Americans for Tax Reform. "If Bob Riley loses his attempt to raise taxes he will be humiliated and it will teach Republicans at the state level they can't get away with it."</p>
<p>The state, however, is in need of some reform. The tax code is antiquated--enshrined in the state constitution back in 1901--and features low taxes on timber and other resource-based industries while income taxes kick in once the top wage earner in a family of four makes $4,600 per year. The governor wants to raise that to $19,500. But he also wants to eliminate the deduction for federal income taxes and create a new higher rate of 6% for upper-income earners. Property taxes, the lowest in the nation, would go up between a third and a half on a typical home. Corporate taxes would be raised. Sales taxes would be extended to car repairs and other services not covered now.
Gov. Riley proposes all of this without reforming state spending. The state budget has increased 88% in the last decade. Education now consumes 56% of the budget and contrary to popular perception, Alabama's per capita spending on schools is well above the figures for neighboring Florida, Tennessee and Mississippi. There are 14% fewer students in Alabama public schools today than there were 30 years ago, but there are 42% more teachers and spending (adjusted for inflation) is nearly triple. </p>
<p>Public employees are another fast-growing portion of the budget. Alabama public employees are, on average, the highest paid in the Southeast. A typical public employee will pay $2 a month for full medical insurance, while a typical private sector employee pays more than $100. Small wonder that public employee health care costs are expected to increase by 12% this year. </p>
<p>Despite the populist nature of many of the proposals, polls show the two groups who would most benefit from the plan--minorities and those earning under $30,000 a year--are most opposed to it. "Black people in particular and poor people in general have always been very suspicious when somebody in Montgomery says, 'I'm going to help you,' because usually in the end we get ripped off," state Sen. Hank Sanders told the Washington Post. He and other black politicians are backing the governor's plan, but admit it's a tough sell.</p>
<p>Gary Palmer, president of the conservative Alabama Policy Institute, says the state does need to restructure its tax system but the governor's plan isn't the way to do it. He suggests much of the shortfall can be eliminated by refinancing state debts, selling some assets and privatizing and contracting out services. </p>
<p>What will happen if Gov. Riley's plan is defeated? Legislators are threatening to approve either video poker or a state lottery. Voters rejected lotto in a 1999 statewide referendum. Religious leaders in the state are worried about the morality of gambling, but instead of accepting tax increases that will hurt the people in the pews, they would do better to demand real spending reform.
How would Jesus tax the state? Well, no one can say for sure. But it's a safe bet that waste, duplication of services and pork-barrel spending aren't in line with being good stewards of resources. The poor are best served by government if its resources are used wisely and prudently, while the private economy is allowed to grow and create a wealthier society that can then be more generous in both public and private expenditures.