Riley Plan & Knight Plan for Tax Fairness

Governor Riley and Rep. Knight both are proposing to make Alabama state income taxes more fair. As you may know, Alabama taxes people in poverty at a rate higher than any state in the nation.

The Birmingham News calls Knight’s plan “close-to-perfect” and Riley’s plan “merely good.” There is another good piece worth reading here.

Here is a good side-by-side comparison of the proposals that comes from Alabama Arise. I would have put the chart in this post itself but for the life of me I couldn’t get the blog to quit messing up the formatting.

Here are some key points (for me) lifted from the comparison:

• The Knight plan would kick in immediately, allow for higher deductions, and be revenue neutral.

• The Riley plan would take five years to implement, save families less money, and take money from the Education budget.
• Riley’s plan is not indexed for inflation; Knight’s plan is. A lack of an index for inflation is why income taxes on people in poverty are so high in the first place. The current $300 deduction for dependents was ample when it was set in the 1930’s. It has never been changed. If our new plan is not indexed for inflation we risk finding ourselves in the same situation down the road.
• Riley’s funds his plan out of the “surplus” in the Education Budget. Question: Is it really a surplus when we are last in the nation in per-pupil-spending?
• Knight funds his plan by removing the highly regressive deduction for federal income tax paid. Only two other states have this deduction. Eighty percent of the cost of this deduction is given to just 20% of taxpayers. This deduction means about $55 in the pockets of people who make $50-60,000. Knight’s plan removes this deduction and puts hundreds of dollars in the pockets of working families.
• However, Knight’s plan requires a vote of the people. Is that insurmountable?

Plus here’s a chance to no longer be the state that taxes people in poverty at a rate higher than any other state in the nation.

Anyway, check it out for yourself and see you what you think.