Here is the 1991 editorial writing Pulitzer Prize-winning

Winner of the
1991 PUUTZER PRIZE
For Editorial Writing
Alabama's unfair, inadequate and growth-stifling tax system has been a
topic of much concern to The Birmingham News.
In April, it looked as though the 1990 tax session of the Alabama
Legislature would take the first real steps toward addressing its many
deficiencies, as debate began on setting up a blue-ribbon tax reform study
commission.
The commission would make two reports, as originally conceived: One
in August before the Alabama general election to spark debate among
candidates on the topic; another in January shortly before the newly elected
governor and lawmakers met for their first session.
Powerful interest groups opposing tax reform were able to reorder that
agenda. Hoping to ensure tax reform would not be a major campaign issue,
they killed the commission's first scheduled report.
The News promised that if the commission could not speak the last
week of August, our editorial page would.
Editorial page editor Ron Casey and editorial writers Joey Kennedy and
Harold Jackson worked for almost three months, examining history books,
studies and tax documents and interviewing dozens of experts to produce a
week-long series informing voters about what is wrong with Alabama's tax
system and how it became so contorted. For their efforts they were awarded
the 1991 Pulitzer Prize for editorial writing.
I thought you might be interested in what we said.
Victor H. Hanson, II
Publisher
The Bubbling Caldron
The first thing they won't tell you about your taxes concerns the
caldron of poverty, exploitation and rotten politics from which they
bubbled.
Outgrowths of our thorny history still hold us back. They germinated in the uprootings of farm families from the fields to the
smokestacks after the close of the Civil War.
Auburn University history professor
Dr. WayI).eFlynt and other historians
have outlined a long, slow slide into deprivation.
Many were on the precipice of poverty before the war began. Four years of
missing manpower, bad crops and
destruction pushed them over the edge.
Thousands lost their land. More than
85 percent of the state's white residents
owned property before the war. Over the
decades, that figure continued to fall
until by 1930, 65 percent of Alabama's
farmers had to farm soil owned by someone else.
The landless blacks and whites searched for something better
than tenant farming or the cyclical bondage of sharecropping.
Lumber became a major industry here and around the Southeast
after timber companies used and abused homestead laws to gain
control of thousands of acres of federal lands. Textile mills,
coal mines and blast furnaces grew up in the foreground of a rural
landscape.
Near the turn of the century, former subsistence farmers could
make a dollar a day at a sawmill; earn $3 for a week of 12-hour
days in a textile plant; or earn 50 cents for every ton of coal
scratched from some of the most dangerous mines in the country.
Alabama miners died on the average of 10 per month .between
1900and 1910.
Instead of helping the struggling, our Legislature went in another
direction.
In 1888,for instance, a five-year tax exemption for small family
farms was turned down. But tax laws were revised that same year
to help big planters.
Following Mississippi, South Carolina, Louisiana and North Carolina, in 1!~01Alabama adopted a new constitution aimed at barring
blacks from voting. But its insidious features, like the cumulative poll tax due weeks ahead of an election, kept low-income
whites away from the ballot box also.
The year 1901marked another milestone. It was the last time the
Alabama 'Legislature altered its representation for more than 60
years.
Instead of redrawing its House and Senate districts based on the
state's population after each census, the Legislature stood still. No
matter what shifts in population took place, the same counties got
the same number of lawmakers.
In 1960, Jefferson County had a population of 634,864. Yet it had
one senator, just like 12,917-person Lowndes County.
Control of state government remained in the hands of the bigplanter counties in the Black Belt in collusion with unscrupulous
industrialists.
Though most of the state's residents, wealth and revenues were
supplied by 'north Alabama, the Black Belt's grip remained in place
until federal courts ordered redistricting in the early 1960s.
The Great Depression devastated Alabama. Employment plummeted here like nowhere else in the South. In 1935, Franklin Roosevelt called Birmingham "the worst hit town in the country."
Even with so many strikes against it, Alabama was on the verge
of making a comeback after War War II. Federal dollars and federal jobs poured in. Alabama lured new industries with tax incentives and promises of cheap labor.
But by the 1960s, the state was embroiled in one racial confrontation after another as the walls of segregation fell and the doors to
the voting booths opened. The turmoil ended an abhorrent system,
but it also spawned continuing damage to the state's ability to lure
out-of-state businesses.
The federal money began drying up in the 1970s and 1980s, and
the economy turned global. Textile jobs went to even cheaper labor
in the Far East. Coal came pouring in from South America.
Steel jobs went to Japan.
With an undereducated work force, bargain-basement services
and a reputation for racial turmoil, Alabama withered in the shadows of Sun Belt growth.
One 1984 estimate said as many as 25 percent of its people could
qualify for food stamps.
The political diseases of the hard-scrabble years plague us still:
• We live in a state with no tradition of strong financial support
for public education. The children went to work.
In 1900, 59 percent of Alabama's boys and 31.4 percent of her
girls between the ages of 10 and 15 held a job. By 1910 the percentages increased to 61.9 percent and 41.3 percent.
Many mills, mines and factories calculated pay on "family
wages," or how much more to pay for new sons and daughters at
the plant.
The poor saw little value in a high school or college education.
That attitude passed from one generation to the next. In the 1980
census, 43.5 percent of Alabama's people above the age of 25
did not have a high school diploma.
Alabama ranked 51st in the nation in state and local revenue
per-person for schools in a 1987 census update .
• We live in a state where the people have a gut-level distrust of
their government. Demagoguery has been more in vogue than
democracy; corruption more prevalent than compassion.
Yet the structures erected to guard against abuse of the public
trust hamstring our elected officials. So much of the state's money
is locked into outdated earmarking systems, we can't make revenues match needs. We can't deal with debilitating problems .
• We live in a state where officials have paid more attention to
protecting big-land interests than people.
For decades, we have bent over backward to make sure the large·
landholders, timber companies and corporate land barons who controlled Montgomery paid next to nothing in taxes .
• We live in a state where the poor, black and white, who were
kept away from the ballot box for decades have seen a shamefully
unfair burden of taxes laid on their backs.
Little wonder they don't want you to know about the tax system
which bubbled up from such a vile brew.
(Tomorrow: Alabama, the cheap date.)
The Cheap Date
Like a painted woman who expects the cheap evening she offers
to attract pdtential dates, Alabama has for decades used its promise of low taxes to lure businesses and industry.
It's about time this state learned what all cheap dates eventually
discover: That they get taken advantage of.
Too many businesses attracted by Alabama's low taxes have
packed up and left after having a good
time.
Others remain, but refuse to make the
same commitment they make in other
states. Even. companies that do extensive business in Alabama won't put their
headquarters here. Our low taxes aren't
enough to provide the services and quality education they want for their
employees' and executives' families.
Why are we so wedded to these low
taxes that do us more harm than good?
Because for decades our state government was not in tune with the needs of the majority of our people.
Even when it did try to act in our behalf, like a child who can't
stand the taste of medicine, we often refused to acknowledge the
benefits of a larger dose.
Instead of doing the right thing, our lawmakers provide whatever
taxes and services they can without disturbing ancient tax taboos.
Then we try to put enough rouge and lipstick on the result
to make it attractive.
Our property tax system is a prime example.
Alabama has, by far, the lowest property taxes in the nation.
They got that way over a long, slow route along a path controlled by
special interests.
Alabama's 1901 constitution placed caps on the rate, but it did
allow 100percent of a property's appraised value to be taxed. That
only stayed on the books until the Revenue Act of 1935 set
a 60 percent assessment rate.
But even that was not seriously collected. Alabama Power Co.
eventually refused to pay it, saying non-utility taxpayers were "systematically and intentionally" assessed at only 40 percent. Elected
county tax assessors knew which side their bread was buttered on.
The Alabama Supreme Court concurred and ordered· Alabama
Power's property tax assessment rate reduced to 40 percent.
In 1967, L&N Railroad used the Alabama Power argument to
have its rate reduced to 30 percent. The state then began assessing
all utility and railroad property at 30 percent.
Later that year lawmakers passed Act 502, which said that
instead of 60 percent, the slice of a property's value to be taxed was
"not to exceed 30 percent."
That much latitude increased the inequities. The amount charged
ranged fnom 8-28 percent, depending on the county.
A lawsuit filed in 1967 sought uniform assessments, saying the
out-of-kilter system robbed schoolchildren in the lowest counties of
the same chance for school funds the higher counties had.
After a few rounds in litigation, in 1971 the court decided Act 502
was unconstitutional since it had originated in the Senate instead of
the House, where revenue measures must begin.
In 1972, voters adopted the 325th amendment to the state constitution, which created three property tax classes. It lowered the
assessment rate to 15 percent on most property. But it also formed
a barrier to raising taxes on huge timber and agri-business tracts
by placing them in the same category as private homes.
Shortly after, the Alabama Farm Bureau used the public's fear of
high taxes on homeowners to campaign for passage of a "lid bill."
The 1975 lid bill was supposed to limit to 20 percent the additional revenue a county could collect after reappraisals.
The Alabama Education Association, pointing out the lunacy in
putting a lid on what were already the lowest property taxes in the
nation, successfully fought the Farm Bureau proposal.
But in 1978, Gov. George Wallace, threatening to expose certain
legislators as tax hikers in an election year, steered a new "lid bill"
through the Legislature.
Told by the Farm Bureau and timber companies that it would
save homeowners tax dollars, voters approved it in a statewide
referendum.
The Lid Law lowered the assessment ratio on most property to 10
percent and set a cap on how much tax could be collected overall. It
also made sure cities and counties would face one tough time
raising property taxes. They had to call a public hearing, get permission from the Legislature and then gain local voters' approval to
do so.
Wallace's 1978 "Tax Relief Package" also installed a "current
use" provision, which lets property owners have their land assessed
without consideration of its real value, supposedly to protect the
small farmer from taxes on higher land values caused by urban
encroachment.
.
But it also cut in half taxes paid by huge timber, agri-business
and corporate land-holders in its first year and shields their land
against increases brought by re-evaluations today. The lid bill, current use: Sprinkle them with the various exemptions to the tax code
and you can see why property taxes in Alabama are so low.
How low? According to the Advisory Commission on Intergovernmental Relations in Washington, in the U.S. in 1988 the average
property tax! paid per person was $538; in Florida, it was $537; in
Georgia it was $396; in Tennessee it was $272; in Mississippi it was
$266.
In Alabama, it was $132.
That deprives our schools of local money, because property taxes
are the maiQStay of local school support. Only 18.3 percent of our
school revenue came from local levies last year. The national
average was 43.7 percent.
Ridiculously low property taxes also tell large landholders to
develop their lands elsewhere first; that they can afford to leave
them alone here while the value increases, but taxes do not.
What incentives do we use to brmg businesses into the state? We
give them property tax breaks, of course.
Industrial property tax exemptions are primarily the result of the
Cater Act of! 1949, authored by Sen. Silas D. Cater of Montgomery,
and the Wallace Act of 1951, authored by a young state representative fro~ Barbour County named George Wallace.
The Walla¢e-Cater Acts give cities and counties authority to set
up industriatdevelopment
boards that may exempt industries from
local property taxes as a way to entice them to locate in the state.
Of course, these exemptions erode the tax base. And since they
are for limited periods, they encourage industries to do business in
Alabama only for as long as the exemptions are in effect.
Allowed to raise their taxes to a level adequate to provide the
quality of life all Americans covet, Alabamians would soon discover
that this state doesn't have to be a cheap date to make others want
to live and work here.
For too long, we have resembled one of those poor, backward
Third World nations we ironically look at as beneath us.
Too often, others use our cheap labor to take our cheap natural
resources, and then they sell the finished products back to us at a
much higher price - as though we were some conquered colony.
If low property taxes are so good for us, why is it that despite
paying by far the lowest taxes here of any state in the union, not one
national timber company has located its headquarters in Alabama?
(Tomorrow: Alabama's split personality.)
A Split Personality
If Alabama were a person, it might need psychotherapy for a
split personality disorder.
It's not quite Dr. Jekyll and Mr. Hyde, but there is a big difference in the ways Alabama treats its poor people.
This is one of the hardest states for poor people to qualify for
government assistance. Yet, it is easier for poor people to qualify to
pay the state income tax here than anywhere else.
A 1988study by the Washington-based
Center on Budget and Policy Priorities
noted that Alabama, with more than 20
percent of its population living in poverty - 829,000 people - is one of the
poorest states in the nation.
But the safety net Alabama provides
for its poor is at the same time one of
the weakest in the United States.
The amount of cash assistance available as Aid to Families With Dependent
Children (AFDC)in Alabama is the lowest in the country.
A fanlily of three with no other income can get only $118 a
month. That's less than a sixth of the federal poverty level for a
family that size.
A 5 ~rcent across-the-board raise approved by the Legislature
last year will go into effect in October. It will be the first increase
in Alabama's AFDCbenefits since 1976.
But think how much prices have gone up during those 14 years.
That paltry 5 percent raise was eaten up years ago.
Alabama could provide substantial relief for poor people, including the great number of families whose meager earnings are just
high enough to make them ineligible for aid, by giving them a
break on income taxes.
But under current law, a family of four in Alabama begins to owe
income taxes when it makes more than just $4,400 a year. That
same family would not owe a dime in federal taxes until it
makes a~least $15,000a year.
Treating poor people in Alabama at least as well as the federal
government does on income taxes could be offset by purging the
state tax law of special favors it gives people who are in better
economiiccondition.
For eXample, look at what the Legislature did in response to
valid complaints that the tax law wasn't treating all pensioners
equally.
The pensions of teachers, state employees, judges, federal civil
service jemployees and railroad workers were exempt from the
income tax.
And the first $10,000 of military retirees' pensions and the first
$8,000 of the pensions of Alabama peace officers and firefighters
were exempt.
Pressured to make things equal, the Legislature last April simply
decided to exempt virtually all pensions.
Since legislators placed no cap on the exemption, even people
making more than $50,000 a year in pension income won't pay taxes
on it after January.
Wouldn't it have made more sense, in a revenue-poor state such
as Alabama, to make things equal by not giving any pension a
blanket exemption?
The Legislative Fiscal Office says exempting all pensions from
the state income tax could cost Alabama $20 million a year. Since
the income tax is earmarked for schools, that's $20 million less for
our children's educations.
As the retiree population in the state grows, so will this loss of
revenue.
Statistics show retirees are now one of the most affluent age
groups in America. Why should well-to-do elderly people receive a
tax break when a younger family trying to survive on less than
$5,000 a year has to pay taxes on its meager income?
Along with pension exemptions, this state's income tax laws concerning businesses need attention.
If Alabama would change the structure of its corporate income
tax, it might not have to rely so heavily on the business franchise
tax, whose constitutionality has been challenged.
Our franchise tax is the only one in the Southeast that uses a
different base to tax businesses headquartered out of state than the
one it uses for companies headquartered here.
The dual arrangement allows Alabama to collect more revenue
through its franchise tax than any other Southeastern state. Yet the
greatest chunk of that collection comes from the tax on out-of-state
firms.
In fiscal year 1989, Alabama collected $67 million on the "foreign" franchise tax but only about $12.6 million from the "domestic" tax.
That discourages out-of-state companies from doing business
here and penalizes those Alabama companies which have incorporated in states with better corporate legal structures.
Making the tax fairer might reduce revenue, which we can't
afford. But that revenue loss could be overcome if Alabama finetuned its corporate income tax.
Alabama ranks 10th in the Southeast in corporate income tax
collected. It and Louisiana are the only two that have a cap on the
corporate income tax rate and also allow businesses to deduct their
federal taxes.
And Lousiana's maximum tax rate is 8 percent for all income
over $200,000,compared to Alabama's top rate of 5 percent for all
corporate income. So the Pelican State isn't doing as badly as this
one with corporate tax collections.
Alabama must make the way it collects income taxes fairer to
everyone. The income tax exemption for pensioners and the unfair
franchise tax for corporations should be looked at in trying to
achieve that fairness.
(Tomorrow: Panhandling the poor.)
Nickels And Dimes
Alabama nickels and dimes its people to death. And its sales tax
hits the poor and middle class hardest.
Tax breaks that should lighten their burden instead go to interest
groups with the most clout in Montgomery.
We tax formula for babies. We don't tax formula for calves.
The guy who buys a new car gets a sales tax break. The guy who
buys a pair of work boots does not.
Food for the elderly is fully taxed.
Food for chickens isn't taxed at all.
We let so many off with special treatment, we have to raise the sales tax on
the rest of us to make up the difference.
In proportion to income, sales and
excise taxes place seven times the burden on poor families they place on
wealthy families. They place four times
the burden on middle-class families.
A much larger slice of the income of
people on the lower end of the economic
ladder is eaten up by food, clothing and other bills subject to the
tax.
And Alabama offers no small burden. This state raises better
than 10 times the revenue through the sales tax it raises through its
property tax.
.
On its face, Alabama's basic 4 percent sales tax rate compares
favorably to other Southeastern states. Georgia's sales tax is 3
percent, Tennessee's rate is 5.5 percent and Mississippi and Florida each charge 6 percent.
But looks are deceiving. Because Alabama's local governments
have such a hard time raising other taxes, biking the sales tax is a
convenient and often-used revenue enhancer. No legislative
authority or public vote is needed.
As a result, some Alabamians pay as much as 9 cents on the
dollar - or more than double the state's basic rate.
In the end, only three states in the Southeast have a higher effective state and local sales tax rate than Alabama - Tennessee,
Mississippiand Louisiana.
The way the tax is applied in Alabama makes it clearly unfair.
But, while no tax can be classified as popular, the sales tax is
probably one of the least objectionable, anyway.
Governments like sales taxes because they generate a lot of
money for the collection effort they involve. Non-residents pay just
like residents, which makes sales taxes especially popular for
tourist states such as Florida.
Residents prefer sales taxes over others because there are no
forms to fill out or separate checks to write. An increase in the
sales tax is counted only pennies at a time, making it appear,
deceptively, as a low-impact tax.
But the pennies add up to nickels and dimes, and the dimes to
dollars.
The major drawback to the tax is its regressive nature; the way it
hits the poor and middle class hardest.
And the regressive impact of Alabama's sales tax is applified
because our state has a much higher rate of poverty than many
others.
If exemptions and rate reductions truly offset the uneven burden
of sales taxes, Alabamians would be celebrating. Alabama has
exemptions - plenty of them - but most of them work against
poor and middle-income families instead of for them.
If you buy a carton of milk, you pay sales tax. If you buy a
"Flight Simulator" home computer program, you don't.
Many items - fertilizer, computer software, food for livestock,
chicken litter, and boxes, twine and stakes used in tomato growing
- are not taxed at all.
Others - heavy machinery, automobiles and food from vending
machines, for instance - are taxed at lower rates.
Alabama's sales tax regulations are so complex and loaded with
so many favors and rate breaks they go on and on, page after page
after page, for better than 300pages.
.
In all, special exemptions and lower rates cost Alabama nearly
$600 million in sales tax revenue last year. While some exemptions are necessary to prevent double taxation, or (like food stamps)
are required by federal law, many are simply the result of one
strong lobby or another having its way with the Alabama Legislature.
While some states exempt food and over-the-counter drugs from
their sales taxes to give poorer families a break, Alabama doesn't.
It might cost $123 million a year to exempt food, but that much
and more could be raised by getting rid of the tax break for automobiles and taxing exempt retail services, like haircuts and dry
cleaning. The Alabama Department of Revenue estimates that a
sales tax applied to retail services alone would raise nearly $160
million.
As Alabama shifts from a manufacturing to service economy,
there will be more pressure to apply the sales tax to retail services.
And why not? Why charge a sales tax for a meal consumed in a
restaurant, but not for a haircut and manicure given at a beauty
shop?
A sales tax on services, while still regressive, has a lighter
impact on Alabama's poorer families. A poor family has to buy
milk and bread, but seldom pays somebody else to launder its
clothes.
Any equitable tax reform in our state has to target the sales tax.
Exemptions should be made for sound economic reasons, not as
favors.
A genuine effort must be made to relieve Alabama's families of
some of their sales tax burden. That's especially true now that
Uncle Sam has stopped allowing taxpayers to deduct state sales
taxes from their federal returns.
The state has to stop panhandling its poor and middle-class families to death.
(Tomorrow: Handcuffing
our money.)
,
i~
I
I~I
Handcuffmg Money
Alabama handcuffs more of its tax money than any other state.
"Earmarking" a tax means it can only be spent on a specific
program or agency. Alabama earmarks nearly 90 percent of its
revenue. The national average is only about 28 percent.
Too much earmarking is one reason "fiscal crises" are so common in Alabama. Whenan emergency requiring more money arises,
most of the tax revenue we collect can't
be shifted around to solve the problem.
Even the day-to-day providing of
essential services the public expects is
hampered by earmarking because the
state can't spend money where it's
needed the most.
Alabama has one of the highest infant
death rates of any state in the nation.
That demands that we spend more on
pre-natal services for poor pregnant
women.
But the amount of money available to
save sick babies' lives in Alabama is limited by the excessive
amount of earmarking we do.
The money we earmark is not being spent frivolously. Yet this
state has greater or equal needs that are not benefiting from its
rigid spending schemes.
And earmarking turns the tax system on its head. Instead of
deciding what is the fairest tax and then how it should be allocated,
we decide what we want to fund first and then pick the easiest way
to squeeze out some money for it.
Reducing the amount of earmarking will mean placing more
trust in the Legislature and governor to make wise spending decisions.
Alabamians have been loath to do that because they don't trust
their elected officials. Also, education in this state benefits from
earmarking. Though they may not fund it with the same tax effort
of other states, Alabamians do care about educating their children.
We earmark money for education because politicians throughout
our history have not shown a strong commitment to schools.
In 1927, Gov. Bibb Graves convinced Alabamians that if they
raised "nuisance taxes" on telephones, telegraphs, etc., the money
would be spent on education. And Graves kept his word.
But the Great Depression bankrupted Alabama, and by 1932 the
state had no money for its schools.
So it followed the advice of the Brookings Institution and considered education a non-essential service that didn't have to be
included in the budget.
An income tax was created and earmarked to payoff the state's
bonded indebtedness, but still no money was set aside for schools.
Everyone had it rough during the Depression, but teachers were
particularly hard hit in Alabama.
If they got paid at all it was usually with promissory notes or
"scrip" worth only 10 cents on the dollar.
Finally, in 1936 a sales tax was imposed and earmarked for
teachers' salaries.
And in 1947, with the state's indebtedness paid off, Alabamians
approved a constitutional amendment re-earmarking the income
tax for teacher salaries as well.
Post-war Alabama, flooded with returning veterans exempt from·
the poll tax and anxious to make life better than in the Depression
years they grew up in, was showing a stronger commitment to
public education.
Politicians continued showing their equal willingness to make
education a sacrificial lamb.
They used fear of the Supreme Court's 1954 school desegregation decision to get an amendment enacted in 1956that removed
all references in the state constitution implying Alabama had an
obligation to fund public education.
With politicians having gone on record twice saying education
was a service the state had no obligation to provide, it's easy to see
why teachers and others have opposed past attempts to reduce
earmarking in Alabama.
But they must understand that earmarking tax dollars is not
enough to make public education what it should be.
Teachers understand the link between other problems affecting
children - poverty, health care, crime - and the jobs they try to
do.
Alabama can't solve those other problems unless it has the flexibility to aim more of its tax money at them.
Earmarking affects not only education's money, but dozens and
dozens of taxes in Alabama.
It has made Alabama like the poor man with an overcoat that's
too short and only has two buttons left.
That poor man needs to open his eyes and admit his coat isn't
what it was; it's gotten old and frayed and no longer provides the
protection it once did.
And unless he makes some repairs, moves some buttons around
and adds some, it will be of little service.
Alabama must open its eyes and see that this state must have the
flexibility to spend the meager revenue it collects where it is most
needed.
Alabamians must have faith in ourselves that we can use our
power as voters to get rid of politicians who don't spend our tax
money where we want it spent - on education and other important, essential programs.
If we use our power at the polls, we will never have to rely so
heavily on handcuffs again.
(Tomorrow: A ship of state with a sputtering engine.)
Storm Warnings
Alabama's ship of state is a leaky old tub, and there are plenty of
rough seas ahead.
The governor and Legislature, year after year, have to bail it out.
Alabama's engine room - the state's tax system - doesn't generate enough power to keep the ship moving.
And when it comes to providing for its passengers, the state ship
isn't much more than a Third World
steamer.
Alabama foster parents are given at
most $208a month by the state. A veterinarian charges more than that to board
a dog for a month.
It may take days for a child welfare
officer to investigate a child abuse complaint because each social worker has
more than 50 cases to handle.
There are only 24 state-funded slots
for treating child drug abusers in Alabama. Yet in Jefferson County, more
than half the young offenders arrested test positive for drugs.
Alabama spends just 56 cents per citizen for drug and alcohol
rehabilitation and prevention, last by far in the Southeast and nextto-the-bottom nationally.
If a family of three makes more than $1,400a year, it can't get
public assistance in this state. That goes up to $1,500 a year this
fall. Any more than that and the family doesn't qualify for Medicaid
either.
The state's parole officers average more than 150 cases each.
That's three times the nationally recommended standard.
Alabama's highway department has identified more than 350
bridges that have to be replaced or they're going to fall in. And
more than 1,000other bridges in the state are classified as. "obsolete or structurally deficient."
Those who think education in Alabama is where all the money
goes need to think again.
Education does better than the services funded from the state's
General Fund, sure, but Alabama perenially ranks on the bottom
rungs nationally in per-pupil spending for schools.
The biggest advantage education has is that at least it's funded
mostly from the major growth taxes: sales taxes and income taxes.
As Alabama's economy grows, revenue from those sources grows,
too.
The amount of tax money that goes into the General Fund grows
little when it grows at all. Most of its money comes from fees or
taxes that provide pretty much the same amount every year. Yet,
the burden on the General Fund increases every year.
Federal mandates in Medicaid mean that by 1992, the state's
share could cost $94 million more than the $116 million it cost just
last year.
Human Resources will spend about $24 million more next year
than it did this year, but with growing demand for child welfare and
Aid to Families with Dependent Children, that only allows the
department to extend basically the same level of service.
The Alabama Judicial Study Commission's Prison Review Task
Force in 1988 said the state needed at least 300 parole officers in
the field to handle the growing load. As of this year, there are only
191 officers, and they'll be supervising more than 30,000 cases by
this fall.
Alabama's inmate population grows by more than 100 a month.
The state needs $40 million a year in new prisons and staffing just
to keep up with the rising number of prisoners.
Meanwhile, the state Highway Department will need $8 billion
over the next 20 years just to bring Alabama's bridges and roads up
to standard.
Thus state leaders grab their buckets and frantically bail, and
year after year manage to just keep the ship above the waves.
They hike liquor taxes. They raise state fees. They borrow from
other funds. But they never get any growth money in the General
Fund.
There are serious storm warnings ahead.
One stop-gap measure approved during the last legislative session, a higher tax on out-of-state hazardous waste that'll bring
in $47 million, is being challenged in court.
Alabama's Insurance Premium Tax, which brought in $125 million in 1989 alone, also is under challenge. And the state could be
liable for $400 million to $500 million in refunds to insurance companies if that tax is ruled illegal.
The state last winter dodged a $60 million-plus disaster when the
court upheld its franchise tax on out-of-state companies, but that
doesn't mean a future court challenge wouldn't be successful.
Alabama may be forced to refund $60 million to state taxpayers
because it did away with the sales tax deduction on state income
tax forms without legislative authority.
Phillips Petroleum has questioned the way Alabama determines
the value of its oil and gas wells. In the end, that could cost Alabama $25 million or more each year.
Anyone of those brewing storms could sink Alabama's ship.
If Alabama can negotiate the rough waters, there could be
smooth sailing just beyond the horizon.
Interest from the Alabama Trust Fund, financed by royalties
from the state's natural gas wells, could increase dramatically by
the mid-1990s. This year, about $45 million in interest from gas
wells will go into the General Fund, but by 1994 some say that could
be substantially higher.
,
But thatl rosy picture should be shaded with Budget Officer Charlie Rowe's, recent testimony that he's been hearing predictions like
that for years, all of which have turned out false.
Even if ~hey do pan out, it would be four years before increased
revenue starts to roll in.
The bottom line is that it will take more money from safe, solid
sources in coming years to keep our heads above water.
Simply unearmarking education dollars and sending part of those
funds elsewhere won't get the job done.
We are a poor state. But on top of that we don't make much effort
to fund basic state services. In 1987, for example, Alabama ranked
46th in the nation in state and local tax collections per $1,000 of
personal income.
Alabama needs honest-to-goodness, genuine tax reform so that
lawmakers have the ability to match money with growing needs, so
that those who have the .ability pay their share, and so that
our citizens can expect more than a minimum, Third World quality
of life.
(Tomorrow: Harnessing a tempest.)
Harnessing
The Tempest
If you want to stir up a tempest, disturb the pocketbooks of the
powerful.
Nothing creates more commotion in Montgomery than altering
taxes.
That's why substantial changes in Alabama's tax system have
come only after great crises: the collapse of the state bank in the
1830s; the Civil War and Reconstruction;
the Great Depression.
This summer a small group set up by
the Legislature is quietly plotting the
course of a peaceful revolution. The Tax
Reform Study Commission will make its
report next January as the next governor and Legislature take office.
Its report could simply gather dust on
a shelf, as have so many others. But it
has a genuine chance of inspiring major
change for a variety of reasons.
Foremost among them is that our
taxes no longer fit our state. The structure is designed to nourish an
economy heavily dependent on agriculture for jobs and dollars.
So many of the dozens of pages of tax breaks in our sales tax
subsidize agriculture. Property taxes on farm, timber and pastureland under "current use" classification are ridiculously low.
Agriculture is still a vital industry. But it offers our people fewer
and fewer opportunities. Between 1950 and 1960 alone, the number
of farm jobs in this state declined by 61 percent. The Southern Regional Education Board predicts that by 2000, 24 percent of
those jobs remaining will be gone.
Our tax system endures not because of logic, but because of the
political muscle flexed by those who set it up, and the complexity of
the systems they fashioned to lock it into place.
You can't substantially
change our property taxes without
amending the Alabama constitution, the basic foundation of state
government. That takes a three-fifths vote of each house of the
Legislature, and then approval of Alabama's voters.
You can't raise the income tax rate without amending the constitution. You can't significantly alter the Byzantine system of earmarking without amending the constitution. Even something as
mundane as a franchise tax on business is mandated by the constitution.
What if the founding fathers 200 years ago had not only outlined
the form of our federal government, but also detailed a tax code?
The balance of power is shifting. Where once the farm belt and
the "Big Mule" industrialists ruled the state with little interference,
today's "Big Mules" - if corporate leaders can be called that are in favor of a major tax reform effort.
The Alabama Business Councilhas led the charge. During the last
legislative session, it proposed a blue-ribbon panel to study taxes in
the midst of a dispute about the corporate franchise tax.
Even when that dispute was settled, the council continued the
strong lobbying that eventually led to the Tax Reform Study Commission's creation.
The political strength of the big-land interests is on the decline.
The loss of perennial supporters like Earl Goodwin and Rick Manley in the Senate in the last legislative elections is a continuation of the slow relaxation of their grip.
Instead of stonewalling any change in property taxes, those interests would do well to accept a fair tax, one in line with what others
in the region assess.
"The bigger they come, the harder they fall" also applies to
taxation.
Take the case of the toxic waste industry. For years, dumpers
blocked anything more than a pittance tax on hazardous waste
buried in Alabama. As the public became more aware of that
minimal burden, and more resentful of it, taxes were jacked up from $1 a ton to $112a ton for out-of-state dumpers.
A similar backlash could occur on timberland taxes.
Property taxes are the key to tax reform. As long as giant agribusiness, timber and corporate acreages escape anything approaching a fair share, no other interest group will accept tax changes
without a knock-down,drag-out fight.
This commission is the best vehicle to drive reasonable change.
In the past, tax reform studies have come from academics, or
members of some blue-ribbon panel of experts (and. allies)
appointed by the governor. They could not form a consensus the
breadth of Alabama's economic interests might rally around.
This commission's membership includes representatives of farming and timber, labor, academia, business, law and politics. Its
report, after months of testimony and public meetings around
the state, should be a broad-based assessment of what Alabama
needs.
It can add to the chances of success by following two simple
rules: Be fair and be clear.
It has to propose something more than just a series of convenient
tax hikes. Louisiana Gov. Buddy Roemer tried that kind of "tax
reform" a couple of years ago. His package would have made $600
million in temporary taxes, mostly sales taxes, permanent. It was
clobbered by Louisiana voters.
Nor can tax· reform be sold with games, the most prevalent of
which is the voter-pleasing notion that overhauling Alabama's system should be "revenue neutral."
Anyone who talks about revenue-neutral tax reform here is talking about less money for schools. The most critical problem is the
state's always bankrupt General Fund. The only way to fix that
without raising more revenue is to take money away from education.
We need more revenue, and we can provide it. Alabama only
makes about 87 percent of the tax effort of the average state system, according to the latest Census figures.
Tax reform has to be clear. When this commission makes its final
report, it should be in crystal clear language, with precise suggestions any Alabama taxpayer can understand.
And it ought to offer a bill, ready to be introduced in the Legislature, based on its recommendations. Then the people can see which
of their elected representatives want to do more than just give lip
service to tax reform.
Give the people the plain truth and they will harness the tempest's energy for progress.
(Tomorrow: An ageless benediction.)
The Cricket's Song
In the sanctum of a summer night, the cricket sings an ageless
benedictiob.
Those few still moments before bone weariness turns to sleep,
how many!generations of Alabamians have heard its chorus behind
a feeble resurrection of ambition numbed by the fatigue of just
getting by?
Exhaustion. Desperation. Ambivalence.
A dull-eaged longing, too, subtle and
relentles~ as the cricket's cry, that
things mig)J.tget better for their children
and for their children's children.
They he~r it in 1918,in the same year
their Legislature spends $135,000 on
prevention of disease in farm animals,
but only $26,000on public health.
"And you find her (Alabama) third in
the production of iron and ore; fourth in
the produ~tion of pig iron; sixth in the
production of coal; ninth in the production of cotton," says the
Russell sage Foundation of New York in a report to Gov. Charles
Henderson.
"But whenyou come to the record of her social development you
find Alabflma second or third in the profit derived from the
labor of her convicts, but far down in her efforts for their reformation; high in illiteracy, but low in public school education ... high in
the protection of the health of hogs and cattle, but low in the protection of 'thehealth of people."
The report recommends tax reform.
The children of the parents of 1918hear it in the 1930s,even as
James Agee is in the midst of his self-centered account of life
among his personal gallery of Alabama tenant farmers, Let Us Now
Praise Famous Men:
"They live in a steady shame and insult of discomforts, insecurities and inferiorities, piecing these together into whatever semblance of comfortable living they can, and the whole of it is a
stark nakednessof makeshifts and the lack of means; yet they are
also profoundly anesthetized . " the deepest and most honest and
incontrovertible rationalization of the middle-class Southerner is
that they are 'usedto it. ' "
The words come just after Gov. B.M. Miller ends a long battle
with the Legislature, and voters, over how to bail out a state
bankrupted by Depression.
The Brookings Institution's exhaustive study of Alabama government recommends radical tax reform.
Yet Miller has to try three times to enact even a limited income
tax plan to keep the Legislature from funding the whole burden of
Depression debts from sales taxes on "the little man."
The children of the tenant farms are the workers of the factories
by 1947. They hear the cricket's call in the beds of "company
houses" as a soot-stained Birmingham writhes to maturity. A
sparse metropolis it is.
"At war:Send, the once Magic City relapsed again. Birmingham
in 1947 had no local symphony orchestra, chamber music society,
com~unity theater, outstanding parks or downtown clubs," writes
historian Virginia Van der Veer Hamilton.
"Even its zoo had closed. Schools and other public services were
starved by a low property tax structure. "
The Legislature's Interim Committee on Revenue, composed
largely of businessmen, publishes its report "The Alabama Revenue
System" that same year.
It sharply criticizes the state's property taxes, saying smaller
landowners are harder hit by them than large land holders. It
charges the whole tax system banks heavily on the poor and "is not
conducive to the economic development of the state."
It recommends tax reform.
The children of those children hear it in the 1960s and 1970s as
farm and manufacturing jobs plummet, while racial turmoil is on
the upswing.
A group of school children charges the property tax system robs
them of decent support for an education. They and others go into
federal court to do what the Legislature has not done for decades accomplish significant tax reform.
The courts throw out the ridiculously low, out-of-balance assessments that shield big landholders from the property tax and orders
a statewide re-evaluation. But the Legislature steps in with other
shields.
In 1967, the percentage of property value subject to taxation is
lowered from 60 percent to 30 percent. Later from 30 to 15 percent.
Later from 15 percent to 10 percent. Even from that level, in 1982
passage of a "current use law" cuts the taxes paid on some of the
state's largest tracts in half.
The last thing they won't tell you about your taxes this week is
that for a hundred years, the state of Alabama has not been on your
side.
M~ny lawmakers have been. Some governors have been. But the
sta~ itself, through its intricate webs of institutionalized favoritism
and tiheinadequacies of its services, has not.
It ktcts through contrivance, to protect the sacred cows. It acts
thro~h convenience, to pass taxes that meet the least resistence
~d
of justice.
,
,
The restilt is a disgraceful system that pats the powerful on the
back instead of lending a helping hand to the struggling.
We hav~ the lowest property taxes in the nation. Yet we rank
near the lxtttom in funding for our schools.
We are one of the poorest states in the union. Yet our tax system
overburdeJ;ls our poor.
We rust jn the shadows of the Sun Belt. Yet our taxes and services
cloud economic growth.
Alabam~ has a higher percentage of residents who are natives
than alm~t any other state. We are the sons and daughters of
slaves andiplanters, of tenant farmers and merchants.
We are fa people who carved a world healing center out of a
mountain of iron; who turned cotton fields into moon ship factories;
who, even:in· the shackles of poverty and the disunity of prejudice,
relentlessly crawled forward.
And we !have done all that though our state has not been on our
side.
Fifteen years from now, the cricket will pray an ageless benediction over tlle ambitions of our children.
How long before the state of Alabama says amen?
The Shape Of
Tax Reform
The,Alabama Commission on Tax and Fiscal Policy Reform will
not make its report until January. Its members have not yet arrived
at a consensus on how best to cure what ails our ineffective tax system. !
We urge them to consider these recommendations:
• Aljabama has to do something about the shameful way big landowner~ are allowed to avoid paying
property taxes.
Our ',property taxes are the lowest in
the nation overall, but they are lowest
for owners of some of the largest land
tracts 'in the state who classify their
land urtder "current use."
One 'timber company pays $4.50 an
acre per year on land it owns on the
Georg~a side of one forest, and then
crosses, the state line to pay Alabama
only 77 cents an acre for the same land
and th~ same trees.
Make those people pay at a rate in Alabama comparable to what
they pa~ in other states.
Fashion a system that allows counties to alter their property tax
rates without having to climb over needless obstacles erected by
the state Legislature .
• Alabama has to make its sales tax fairer.
Take ,a look at the 300-plus pages of exemptions and tax breaks to
see which are fair and which are political favoritism.
Do something so that the sales tax doesn't hit the poor and the
middle class so hard - like exempting food and over-the-counter
drugs, Qr giving those people an income tax break large enough to
cover tJleir sales tax payments on basic necessities .
• Bring Alabama's income tax more in line with the federal
income tax.
We sllould raise the level at which people have to start paying.
A family doesn't pay taxes to Uncle Sam until it makes $15,000 a
year. Here a poor, struggling family earning any more than $4,400
files an Alabama return.
The small amount collected from Alabama's poor families probably isn't even worth the administrative costs.
At the other end, why should wealthy pensioners be exempted
from paying any income tax?
• Free up our money.
Recommend that the Alabama Legislature adopt a tough ethics
law to improve the bond between it and the people of this state.
Give us a constitutional amendment that makes funding education one of ~ state's top priorities.
And then let us start wriggling our way out of a system in which
90 percent of all revenue is earmarked, and can't be touched in
any logical attempt to make revenue match needs.
• Most important of all, make our tax system work for us.
Our children deserve the same kind of education children anywhere in this country get.
We can't provide that when we're on the bottom in the nation
in school fUnding.
Money alone doesn't buy a good education, but it certainly
improves tie opportunities for making schools better.
We are among the poorest states in the union. We will not make
significant progress until we do a better job of helping our poor
people. In the end, all our fates are intertwined.
Aslong as we provide only bargain-basement schools, roads, public amenities and social services, Alabama will never be able to
bring good-paying jobs to its people from the outside or provide
a nurturing atmosphere for them at home.
We have lived with the scars of our past long enough.
Show us the way to an unblemished future.