As 2021 comes to a close, many Alabamians are reflecting on the year that was, making resolutions, and thinking about what 2022 may hold.
Alabama’s state government is no different. 2021 was a banner year for the business of government, and with the next regular legislative session less than two weeks away, state lawmakers are laying out priorities for next year.
While you may not be giving much thought to the upcoming legislative session during this hectic holiday season, you should. Maybe you need to buy a new vehicle, would like to take a vacation, or just build your savings for the future. Business owners may just be wondering if they can survive another year of COVID-19 impacts.
What the legislature does over the next three months will play a big role in what 2022 holds for you.
First, a look back on 2021.
This year saw more money flowing into Alabama than ever before. The state starts 2022 with a 1.2 billion revenue surplus. In March, Congress passed the American Rescue Plan Act (ARPA) into law, sending another $2.1 billion dollars into Alabama’s state government coffers with nearly another $2 billion going to Alabama county and municipal governments.
The state has received the first half of its ARPA funds, with $480 million already being committed to prison construction and other uses. That still leaves over half a billion dollars that lawmakers will decide how to spend in the coming weeks.
Tens of billions more dollars have flowed into the state either directly or indirectly from the federal government under the guise of pandemic relief.
But little of that money has made it back into the pockets of Alabama citizens and businesses that are still struggling from the impacts of COVID-19. Instead, they face decades-high levels of inflation, which was caused at least in part by out-of-control federal spending, and gas prices that are over a dollar per gallon more now than they were a year ago. To add insult to injury, Alabama lawmakers allowed another $.02 per gallon gas tax increase to take effect in October.
The signature “accomplishment” of the legislature and governor in 2021 was legalizing medicinal marijuana, which could mean tens of millions of more revenue dollars for the government and make the chosen few who are allowed to participate in the business very wealthy. Lawmakers also spent months on a failed effort to expand casino-style gaming and create a state lottery, which again would have meant truckloads of new revenue for the state and a handful of casino operators chosen to operate expanded facilities.
Despite record state revenue and unprecedented federal intervention, in 2021 it didn’t seem to occur to lawmakers that they could use some of that windfall to take less from Alabamians. Meanwhile, numerous other states did just that.
So, what will 2022 hold? We already know that gambling legislation will be back when the legislature reconvenes next month. Lawmakers spent months debating the issue last year, and it could again dominate the session, leaving little time for more important legislation to be debated. Other priorities will be another massive increase for the education budget, a second straight year of teacher pay raises, and retiree bonuses - politically popular things leading up to the election.
Going into an election year it is iffy at best as to whether the legislature will accomplish much of anything, let alone major tax reforms that will benefit all Alabamians. But they should, and there is a glimmer of hope that the legislature will.
Senator Arthur Orr has already pre-filed two bills that will lower the tax burden for low-income and retirement age Alabamians. Orr’s proposal is certainly better than not reducing taxes at all, but lawmakers should think bigger, and use the state’s cash windfall to lower income tax rates for all of Alabama’s citizens and businesses.
Several bipartisan bills have also been introduced to “axe the food tax”. Alabama is one of a handful of states that still fully taxes the sale of food items. Eliminating this tax would provide an immediate benefit for all Alabamians, but lawmakers have enough money available to eliminate the food tax as well as reduce personal and corporate income tax rates. Making Alabama more attractive to new businesses could have untold long-term benefits.
As citizens, our future is directly linked to the actions of our legislature. In the new year, the resolution for state government should be to go on a diet. Take less money from its people and stop feeding its own growth. If lawmakers can stick to that resolution, 2022 and beyond could be much better for all of us.
Justin Bogie serves as Senior Director of Fiscal Policy at the Alabama Policy Institute. The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News. To comment, please send an email with your name and contact information to: [email protected].