It's rare that elected officials of all ideological stripes agree on how to spend money, and it's even rarer that elected officials agree regarding cutting taxes. What is clearly unanimous in the state of Alabama is widespread understanding, and literally, everyone is in agreement that state coffers are overflowing.
In response, Alabama House Minority Leader Anthony Daniels recently called for a grocery tax holiday. Although Leader Daniels argued for being sure the state budget remains whole with any corresponding cut, he reiterated that he has supported getting rid of the grocery tax in the past and will continue to push for it in the future. "And so we start there, and we start with a grocery tax holiday," he continued, "and I do believe, adamantly believe, that because it's a need, not a want, and folks need nourishment to survive, I do think it's something that we have to look at, and I've been for it and will still support it."
State Sen. Arthur Orr, the chairman of the Alabama Senate Education Trust Fund Budget Committee, went a step further when he recently said, "It seems to me we conservatives need to send money back to the people of Alabama who are facing inflation and challenging economic environments, and the price of gasoline, food, etc. These staples of life go up, and if we've got the dollars to do it, we need to send some back." He advocates for a targeted rebate plan for taxpayers to get a return from what they already sent to Montgomery to fund state government. Orr also says that moving forward, the state needs to look at additional tax cuts to help people by putting money back into people's hands.
Libertarian candidate for governor Jimmy Blake went yet another step further to say that voters are upset with Republican elected leadership and candidates. Blake declared, "They're mad at the Republican leadership. They talk small government, but what they've done with the state budget when all of our surrounding states cutting the taxes, Alabama increased the gas tax and gave no tax relief to speak of. They want to claim they did, but it doesn't amount to squat in the long run." Blake outlined a plan to reduce debt and begin phasing out the state income tax. "Tennessee doesn't have an income tax. Florida doesn't have an income tax. Mississippi is phasing out their income tax. Georgia cut taxes by $2 billion this year. And Alabama increased the gas tax. That's not the small government the Republican Party speaks about, and a lot of people who are aware of it and are very unhappy."
Alabama ended last year with a $1.5 billion revenue surplus. The state legislature also passed the largest budgets ever in the state's history (again). There were very few discussions about tax reduction or reform and even fewer tax cuts. The House Republican caucus touted huge budgets and spending increases as their major accomplishments for the session. The Senate Republican caucus was no better as they continuously touted the passage of historic raises and bonuses for public employees along with advocating for and being proud to pass the largest budgets in state history Note: these are Republican caucuses, not Democrat caucuses.
In response to the multi-billion surplus last year, the Alabama Legislature passed a tax cut of $160 million during the 2022 regular session. Eight-five million dollars of that was curtailing the taxation of individual COVID-19 relief payments. That total amounts to a little more than a 1% cut. That's right. At the very end of a four-year stint with upwards of a 40% increase in state government overall, the Alabama Republican supermajority cut taxes in the middle of campaign season: 1%. Legislators repeatedly refused to consider the elimination of or freezing of the gas tax they increased in perpetuity, ignored the continued calls for the elimination of the grocery tax, and sat on a multitude of options that would have reduced the tax burden on both businesses and citizens in Alabama. While our legislature was busy spending money as fast as it was available (and sometimes even before it was), our surrounding states were hard at work giving taxpayer funding back to its citizens. Georgia cut $2 billion in taxes last legislative session while also cutting state spending. Florida is set to reduce the tax burden of its citizens by $800 million from legislative actions taken last year. The state of Mississippi is working toward the elimination of its entire income tax and reduced taxes by $500 million by eliminating its lowest bracket. It is clear that Alabama is getting out-maneuvered by much more moderate states.
In budget meetings last week and in recent media appearances, Alabama Legislative Services Agency's deputy director Kirk Fulford announced that the state is in the middle of an additional $700 million surplus (and climbing) as we move toward the end of the fiscal year next month. That extra money will roll over into the next fiscal year, so the budgets will begin the next fiscal year in surplus. The state also has a billion dollars in reserves to curb any sort of negative contraction from a recession. State budgets are currently growing at a 10% clip (anything north of 4% is very healthy) and have shown no signs of slowing down yet. Next year's state budget could experience negative growth and still be flush with cash. To put that in personal terms, you could lose your job tomorrow and still have more than enough money to pay all your bills and save some for retirement next year … if you were state government. Too bad you're not.
Alabama House Education Budget chairman Danny Garrett described it this way, "The state is awash with cash." And that's AFTER growing state government by almost 10% annually over the last quadrennium and giving out generous pay raises to every single state employee and teacher.
I've heard a lot about the health of Alabama state government bank accounts and budgets. It's time we heard a lot more about the health of Alabama taxpayers' bank accounts and wallets as we move toward the next legislative session.
An extended sales tax holiday would provide immediate inflation relief to Alabamians who have been overtaxed by the state. A grocery tax holiday would help many people trying desperately to get adequate food on the table. Similarly, a gas tax holiday would be a welcome relief for Alabamians struggling to make ends meet while being forced to pay record-setting gas prices.
Holidays are good. Rebates are great. Tax cuts are better. What would truly be best would be a shift in perspective from our Republican elected leadership that huge budgets aren't anything to brag about and that having (and spending) the most money ever in the history of state government is nothing to be proud of. What would be truly miraculous would be a genuine understanding from our entire leadership that there really is no such thing as state money. Government doesn't produce money -- taxpayers do.
In a Republican supermajority/dominated state, full coffers shouldn't mean that politicians get creative about how to spend money quickly and then high-five each other for a job well done. Overflowing budgets should mean that our elected officials get busy returning that money to its rightful owners: the people.
Stephanie Holden Smith is an experienced policy analyst, political commentator, and public speaker. Smith has worked and volunteered in Governmental Affairs in Alabama since 1997, including lobbying for a Fortune 500 company and serving as Deputy Director of Finance for the State of Alabama. She is currently the principal of Thatcher Coalition LLC. To contact Stephanie, please go to http://thatchercoalition.com. 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 Commentary@1819News.com.
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