National anti-tax group pleads with Alabama legislators to refuse to raise taxes

MONTGOMERY, Ala. — Grover Norquist, President of Americans for Tax Reform, sent Alabama’s lawmakers a stern letter Tuesday warning them to stop looking for an easy way out of the state’s current General Fund budget crisis.

Heading back into the Special Session, which will reconvene August 3rd, state politicians have floated a bevy of tax hikes that including a soda tax, increased business taxes, and elimination of the FICA deduction.

Echoing his suggestion from the Regular Session this Spring, the governor also proposed the legislature pass a cigarette and tobacco tax he estimates will raise $70 million. Of the taxes proposed by the governor to fill the General Fund’s budget hole, the tobacco tax increase has arguably been the most popular among legislators.

Norquist, the head of the Washington, D.C.-based non-profit Americans for Tax Reform (ATR), has perhaps been the country’s most effective opponent of tax hikes since then-President Ronald Reagan urged him to start his anti-tax group in 1985. ATR is best known for organizing the Taxpayer Protection Pledge, which asks all candidates for federal and state office to commit themselves in writing to the American people to oppose all tax increases.

Bentley signed the pledge. So when the governor floated the idea of raising taxes to solve the state’s budget woes, American’s for Tax Reform responded quickly.

“Alabama Governor Robert Bentley, a Taxpayer Protection Pledge signer, publicly endorsed eliminating tax deductions for Alabama families as a means for solving the state’s overspending problem last Monday,” ATR said in a release. “Enacting legislation that burdens taxpayers with higher taxes and fees to fuel exorbitant state spending, goes against his written promise to the people of Alabama to ‘oppose and veto any and all efforts to increase taxes.’”

At this point in the process, the tax-hike ball is in the legislature’s, not Bentley’s, court. Many demands for higher taxes are now coming from the statehouse and ATR is calling lawmakers out for openly contradicting conservative principles. This time, Norquist personally wrote the letter to each of the legislators addressing the negative economic effect that tax increases impose.

He wrote:

Dear Legislator,

I write today in opposition to Governor Bentley’s proposal to raise taxes by hundreds of millions of dollars. Eliminating state income tax deductions and raising cigarette and vapor taxes will hurt both small businesses and low-income consumers in Alabama.

Raising the cost of tobacco products with higher taxes will unnecessarily punish the poor, without guarantees that these consumers will quit smoking. Smokers often minimize the impact of tax increases, like the 25 cent per pack tax increase proposed by the Governor, by switching to lower price discount cigarettes, smoking fewer cigarettes more intensively, and seeking out low-or untaxed cigarettes.

Targeted excise taxes have proven to be unstable sources of revenue, and ultimately can cause a reduction in tax receipts. Of the 32 state tobacco tax increases that went into effect between 2009 and 2013, only three met or exceeded revenue projects. A reduction in tax receipts is a common occurrence amongst cities and states that attempt to discourage consumption and generate tax revenue with higher tobacco product costs.

The Governor has also proposed raising taxes on electronic cigarettes and vapor products by 300 percent with a new $.25 per mL of vapor and e-liquid tax. Taking aim at e-cigarettes works at cross-purposes with efforts to cut down on the harm associated with smoking. A number of studies have shown that e-cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigarettes instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for many of the negative health effects of tobacco cigarettes.

With e-cigarettes, the free market has provided a solution to a problem that social engineers have not been able to address through stiff government regulations. The imposition of tax hikes on innovative products that reduce smoking and people’s dependence on tobacco cigarettes is misguided and will impede proven harm reduction methods. It will also kill jobs and discourage poor Alabamans from making the switch from cigarettes to tobacco-free alternatives.

Combining and reforming Alabama’s Education and General Fund budgets should be a bigger priority than efforts to raise taxes. As one of only three states with two separate budgets, combining the two would allow for appropriate adjustments to all annual priorities in good years and in bad.

Between 1999 and 2009, Alabama overspent beyond the rate of inflation and population growth by 21 percent. Tax hikes should be ruled out because Alabama doesn’t have a revenue problem; it has an earmarking and spending problem. As such, I would urge you to reject the Governor’s attempts to raise taxes, especially on those who can least afford it.

Some lawmakers have already called for combining the budgets and reforming the system instead of increasing tax rates. Alabama State Senator Paul Bussman (R-Cullman) asserts actual spending on education would be in a better position today if the State Legislature had combined the budgets and made other reforms years ago.

For decades, Alabama has constructed two separate budgets, the larger education budget which funds schools and other educational endeavors, and the general fund budget which funds Medicaid, corrections, the Department of Human Resources (DHR), and public safety.

Within each of those budgets are hundreds of earmarks which require certain revenue streams to go toward particular programs. With the vast majority of Alabama’s tax revenues already earmarked, it is difficult for the state to prioritize spending in years where there are shortfalls.

When the State House and Senate reconvene, legislators will have only a few legislative days to solve the problem.

Each Special Session, which can only be called by the Governor to address a specific issue area, costs taxpayers nearly $100,000 a week according to the Legislative Fiscal Office. Special sessions can only last a total of 12 legislative days over 30 calendar days.