Alabama Politics in
Doc’s Political Parlor
& Home of Lawn Mower Repair

NOTE: Sen. Hank Sanders has written a weekly column for papers in his legislative district for the past twenty years. These rural, weekly papers lack a web presence, and links to the columns are not typically otherwise available. The column below is provided by Sen. Sanders’ office for inclusion in the Daily News Digest.

Senate Sketches # 1092

By

Senator Hank Sanders

********************

“The rich get richer and the poor get poorer.” This statement has been repeated so often it’s a truly well worn cliché. It may be a cliché but it is certainly true when it comes to those paying Alabama taxes.

The Alabama Legislature is struggling with four taxes where the rich gets richer and the poor gets poorer: the federal tax deduction; the Add Back loophole; the REIT challenge; and the Exxon mess. Don’t worry, I will try to translate these foreign terms to plain English as we go along.

We are trying to take state sales tax off food in Alabama. Food ought not be taxed. Food, along with water and air, are the three absolute basics for life. We cannot live without either. Clothing and shelter are also basics but not as absolute. Alabama is one of only seven (7) states that tax food the same as other retail items.

We cannot just take sales tax off food for that will knock a $320 million hole in the Education Trust Fund. That is unacceptable because Alabama already ranks 43^rd in funding public education. For our children’s sake, we have to replace any funds lost.

That’s where the federal tax deduction comes in. Alabama is one of three states that allow taxpayers to deduct all federal taxes from their income before figuring state taxes. And that’s where the rich get richer and the poor get poorer.

A family of four (husband, wife, and 2 children) starts paying Alabama income tax at $12,500. We don’t pay federal income taxes until we make $20,000. Workers making between $12,500 & $20,000 pay Alabama income tax set at five percent (5 percent). (Some other exemptions come into play). However, those making more than $20,000 can deduct federal taxes from their income before figuring state taxes. That makes their figure lower than 5 percent.

On the other hand, we pay 8-10 cents sales tax across the board on food. Four cents ($0.04) of that goes to the State and the reminder to local governments. This burden falls heavier on the lower income because a larger proportion of their income goes for food. The rich get richer and the poor get poorer.

The effective Alabama income tax rate for those making $1 million is less than 3 percent. Those making $500,000 have a rate of 3.1 percent. Those making $100,000 have a rate of 3.14 percent. The more you make, the lower the rates. That’s the opposite of what it should be.

While we are having to cut nearly $400 million from the Education Budget, 44 giant multi-state corporations are trying to take $67 million from our children. Some of these corporations pay state income taxes in virtually every state except Alabama. We closed this loophole in 2001, but these corporations forced it open through the courts.

These corporations create sham out-of-state corporations (some are just post office boxes) in Delaware and a few other states that do not have state income taxes. Then they shift “ownerships of brands” to these sham corporations and pay royalties to them that vary so they consume all their profits for tax purposes. In the end, they pay no income taxes to Alabama or any other state.

In-state businesses, however, pay the full 6.5 percent corporate tax rate. What it amounts to is that the rich get richer and poor get poorer. The Add Back law is designed to stop these shams by adding these royalties back for tax purposes if no income taxes are paid in other states.

Some giant multi-state banks and other corporations set up sham out of state companies and shift ownership of their buildings, equipment, etc. to them. Then they pay them rent which varies to equal every potential profit. We call this REIT (Real Estate Investment Trusts). The result is they pay no Alabama income taxes.

Again, in-state banks and other businesses pay corporate income tax at 6.5 percent. Some giant multi-state corporations use both the Add Back and REIT loopholes to avoid taxes. Either way, the rich get richer and the poor get poorer.

Finally, Exxon Mobil made $40 billion in profits last year. Yet, they are deducting so many bogus costs in Alabama for getting our oil and gas out the ground they may not pay any severance taxes. Even with gas moving to $4 per gallon, they seem to be saying oil and gas out the ground cost more than it’s worth. The rich get richer and the poor get poorer.

Since most Alabama income and state sales taxes go into the Education Trust Fund, it is our children who suffer when these giant multi-state corporations do not pay their fair share of taxes. While our children are the biggest losers, all Alabamians and Alabama businesses lose when the very rich get richer and the poor get poorer.

Now on to the Daily Diary.

Saturday - I worked on many matters and talked to various leaders including Dr. Paul Hubbert of the Alabama Education Association (AEA). Among the many issues I worked on were budgets and bingo.

Sunday - I did Radio Sunday School with Malika Sanders Fortier and Radio Education with Perry County School Superintendent John Heard. I taught Sunday School and discussed education, community, and political issues over Sunday Dinner with Fannie and Bobby McKenzie. I talked with various leaders including Dr. Carol P. Zippert of Greene County and Senate Majority Leader Zeb Little.

Monday - I participated in a conference call concerning Senate operations and handled various other matters. I talked with the following: Joyce Bigbee of the Legislative Fiscal Office (LFO); Senator Rodger Smitherman; Dallas County Grassroots leaders Essix Watters and Sam Walker; Ralph Paige and Jackie Ward of the Federation of Southern Cooperatives in Atlanta; Georgia Blackmon of Pensacola, Florida; Dr. James Mitchell of Wallace Community College Selma (WCCS); Dixie Bonner of Talladega; Pat Tolbert of Selma; Khalil Thompson of the Barack Obama Presidential Campaign; and Lowndes County Commissioners Dixon Farrior, Marzette Thomas, and Robert Harris. I traveled to Lowndes County for a Commission meeting where I talked with several citizens before returning to Selma and working into the night. The stress of the intense struggles over the past weeks reactivated my gout.

Tuesday - I worked on several issues before going to Montgomery for a series of meetings involving bingo, budgets and Senate operations. The gout continued to get worse. I talked with many leaders including the following: Businessman Milton McGregor; Senator Bobby Singleton; Senator Lowell Barron; Senator Hinton Mitchem; Senator E. B. McClain; Senator Vivian Davis Figures; Senator Bobby Denton; and Charley Grimsley. I participated in a Senate Session where we were forcefully detached from further considering bingo. Another filibuster started up immediately in the Senate so we did not pass any bills. I participated in a press conference and attended a dinner with Road Builders before returning to Selma.

Wednesday - I was back in Montgomery for an 8 a.m. meeting. Every minute was filled meeting with individuals or groups about education, taking state sales tax off food, or other tax issues. I received a call from Presidential Candidate McCain about last week’s Sketches. My bill to take sales tax off food came before the Senate but failed to get the 3/5 votes required to be considered. The bill will come back up next week. I talked to many legislative leaders, lobbyists, and citizens including a delegation from Greene County. I participated in a press conference about taking sales tax off food and also talked by phone with Laddi Jones of the Greene County Democrat Newspaper. I returned to Selma.

Thursday - I was back in Montgomery for an 8 a.m. breakfast meeting for Law Day, an 8:30 a.m. meeting on the budgets; a 9 a.m. meeting on Senate operations and so on. I met every minute from early until late and could hardly walk from my office to the Senate Chambers because the gout was so painful. Among those I talked with were: Senator Tom Butler of Huntsville; Senate Deputy Pro Tem Wendell Mitchell; Representative Jeff McLaughlin; Senator Phil Poole; Senator Steve French; Senator Linda Coleman; a delegation from the business community about taxes; Representative Richard Lindsey; Representative John Knight; and Lobbyists Joe Fine, Don Gilbert, and John Teague. I participated in the Senate Session, met with media several times and worked into the night before returning to Selma.

Friday - I began writing Sketches, talked with Joyce Bigbee and Kelly Butler of LFO, and met with the following: Wilcox School Superintendent Dr. Rosie Shamburger; Jan Hayes of Conecuh County Schools; John Terry of Pinetucky Volunteer Fire Department; Leith Wilson of Boy Scouts of America; John Culliver of Brooklyn Volunteer Fire Department; and others. I talked with the following: Consultant Rick Heartsill and Representative John Knight about removing sales tax from food. I traveled to Montgomery for the Alabama New South Coalition Endorsement Convention and spent the night.

EPILOGUE - The more we get, the more we want. The more we have, the more we are able to get. That’s why the rich get richer. The poor get poorer because it is easier to take from the poor than the rich.

Share This