When Republican Bob Riley narrowly unseated Democrat Governor Don Siegelman in the 2002 election, a massive tax increase on Alabama’s citizens is the last thing most conservatives expected from the new governor. But that’s exactly what Gov. Riley delivered.
Gov. Riley, as voters in Alabama know, is a man who constantly pays homage to Ronald Reagan. And it was Reagan who understood, and warned against, the mantra of big-government: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. But rather than heed this warning, Gov. Riley is embracing it.
Riley’s reform effort, known as “The Plan to Invest in Alabama’s Future,” consists of 20 separate bills amounting to a $1.2 billon tax increase. The Democrat-controlled state legislature passed the package over this past weekend, but voters will have a chance to stop the tax increase in a statewide referendum scheduled for September 9.
Riley’s plan is nothing if not ambitious, as it contains tax increases on nearly every sector of the economy: income taxes would increase, as would taxes on property, cigarettes, cars, labor, paper wealth (stocks, bonds, mortgages, and deeds), and corporations. Riley’s stated goals are to pour money into Alabama’s beleaguered educational system, bring progressivity to the state’s tax code, and cure what he calls the “worst fiscal crisis since the days of the Great Depression.”
Ironically, the governor made the case against higher spending in a December 2002 interview with the University of Alabama’s Crimson White newspaper, when he said, “The Siegelman Administration has spent $2 billion more than the previous administration on education, yet the public school system in Alabama is no better off than it was four years ago.” Riley added, “I will fully fund education, but before we can fully fund it, we have to reform it so we get results for the dollars we invest.”
One way to encourage innovation and efficiency in education would be to push for charter-school legislation. Alabama is currently among the handful of states that do not permit charter schools at all. Vouchers are another much-needed reform that Riley supported while in Congress, but as governor, he opposes them. Since Riley has not pursued two of the most popular and successful education reforms available, it is no wonder he is falling back on the tax-and-spend bromide.
Riley’s tax hikes, his shifting of the tax burden, and his willingness to pour money into education absent substantial reform is the sort of thing one would expect from Hillary Clinton or Ted Kennedy. But the governor’s votes as a member of Congress earned respectable “B”s in the National Taxpayers Union’s comprehensive ratings. To this end, Riley honestly sees himself as a standard-bearer for Reagan’s legacy. He even invoked Reagan’s record while governor of California in support of his tax-increase proposal.
Alabama is in need of tax reform, but for too many officials, including Gov. Riley, “reform” really means “increase.” Alabama is a relatively low-tax state (it ranked 46th in state tax collections per capita in 2001), but that doesn’t mean it is suffering from inadequate revenue. Among other issues, one major problem in the state is the lack of spending flexibility at the local government level. In fact, more than 87 percent of Alabama tax receipts are earmarked for specific budget items; the national average is less than 22 percent. Just as the federal government has improved its efficiency in recent years by allowing the states to suit programs to their needs, Alabama needs to allow localities to tailor their spending priorities to individual circumstances.
Another serious problem is that Alabama’s income-tax structure starts taxing a family of four on an income of just $4,600, the lowest threshold in America. Rather than tinkering with the system and dramatically raising taxes on higher-income individuals, Riley could go Reagan’s record on cutting income taxes one better — he could eliminate the state’s income tax entirely.
As economist Richard Vedder found, during the 1990s some 2,849,310 people moved from states with income taxes to states without income taxes. A more efficient tax code and government structure would enable the state to attract jobs without the narrow, politicized tax favors that were required to lure Mercedes-Benz and other corporations to the state.
If Gov. Riley is serious about turning Alabama into an economic powerhouse, his “soak the rich” mentality is taking the state in the wrong direction. A loss for this tax plan would be a real win for the Gipper — not to mention Alabama’s taxpayers.
— Paul J. Gessing is director of government affairs for the National Taxpayers Union. Write to him at 108 N. Alfred St., Alexandria, VA 22314, or visit www.ntu.org.