Many people have a fundamental misunderstanding about taxes. Don’t get me wrong, I’m no anarchist, and I believe that civil government has a role (though a limited one) in all of our lives. The incremental nature of taxation aids in its universal acceptance, but one point should be made in regard to government money: it doesn’t exist.
Government produces nothing and only exists to serve the people who consent to be governed. Taxation is the act of extracting earned income from those constituencies by force. Newsflash for the uninitiated: there is no money tree in Montgomery; the Montgomery money tree is us.
The state of Alabama operates on a fiscal year that ends on Sept. 30. The state finished this year with $3 billion in savings accounts and about $2 billion extra in taxes. What did the state government do for you and your family in 2022? You’ll be proud to know they were successful in giving historic pay-raises to basically every public employee (none of whom were in danger of losing their job during the pandemic from a government-forced closure or vaccination mandate) at the same time that hundreds of thousands of private employees were deemed non-essential and run out of business by the big box stores that government did deem essential.
Additionally, the state government magnanimously invested in mainly itself as it grew at an alarming rate while collecting that extra $2 billion of your hard-earned money. Over the past two years, in the midst of the COVID-19 pandemic, the state government collected more taxes from Alabamians than at any point in the history of the state. On top of that, state government spending grew by almost 40% from 2019 to 2022.
What do they plan to do with the $3 billion in rainy day funds that weren’t expended during the rainiest of days in modern history we just lived through? Keep it.
What do they plan to do with the $2 billion extra that they took from our collective wallets? Spend it. But it’s hush-hush on which “topics” they prefer. They’ll let you know. Maybe.
In addition, revenue surpluses have averaged over $1 billion per year for the last four years. Let me interpret. Those who claim to be small government, low-tax Republicans have taken an extra billion from our collective pockets and ballooned state government by 40% since 2018. Alabama Republicans are spending money and bloating the bureaucracy at a rate that would make both AOC & Bernie blush. They show no signs of slowing down and have shown no indication that they intend to restructure tax policy to make sure state government doesn’t take more than they need for the next four years. In fact, despite historical surpluses and astronomical governmental growth, Gov. Kay Ivey maintains it is actually unwanted federal spending that is causing the influx. Insert eye roll here, and when in doubt, blame Biden.
This revenue, according to Ivey, is “completely unsustainable” and stems directly from “reckless” federal spending.
"Let’s be clear, though: This is the citizens’ hard-earned money, and I thank each one of them for keeping our economy rolling and economic activity robust, even in a difficult climate,” she said. “While our budgets are balanced, we are recording revenues far exceeding normal levels. In fact, these revenues are historic but completely unsustainable. No doubt, this surplus is a direct result of reckless spending by the federal government.”
The state of Alabama is required by law to have a balanced budget, so don’t be impressed, and I haven’t included CARES or ARPA federal cash infusions into any of the above calculations. Rest assured that there was a boatload of federal money being pushed to the states, including Alabama, and that there is another $1 billion in play in Alabama this year on top of what I already articulated.
Please hear me clearly: a Republican governor and Republican legislative leadership publicly thanking its citizens for a surplus and increasing state government by 40% in private is not ideologically-aligned Republican behavior. A Republican governor and Republican supermajority summarily ignoring the fact that the people they represent shouldered the burdens of small business closures, ludicrous lockdowns and maniacal mandates while they intentionally increased state government ranks and padded the coffers on the backs of the citizens they represent is nauseating. A Republican governor and Republican supermajority attacking “reckless federal spending” while maintaining and promoting their own record surplus and supplemental appropriation spending is downright wrong.
Some Republicans have floated the idea of rebate checks for taxpayers; tax rebates and checks in the mail sound nice and are pretty popular in blue states among Democrats. Biden seems to like them a lot. However, they do little to fight inflation and “may actually be counterproductive” by enabling additional consumer spending on items in scarce supply and thus contributing to higher prices, said Hernan Moscoso Boedo, an economist at the University of Cincinnati. The larger question is why are our Republican leaders following Democrat principles regarding the size and scope of state government, and why are they exploiting tax policy to (over)fund it? What happened to being warriors for limited government and low taxes? Were those talking points just for campaign ads?
What are other GOP-controlled states doing in response to the surplus cash flow? Some states are providing rebates (Georgia, Indiana, Idaho and South Carolina) and changing tax policy to make permanent income tax rate cuts. Mississippi is moving toward a complete elimination of its income tax. Missouri just completed a special session that accomplished the largest tax cut in their state’s history. Florida governor Ron DeSantis signed the largest tax relief package in Florida history in May. Alabama is quickly becoming the reddest state in the nation to ignore its small government platform principles and its legitimacy as the party of limited government and large tax cuts.
Alabama Republican leadership refuses to pause or eliminate the grocery tax that has harmed average Alabamians during very difficult economic circumstances (some of which state government officials caused themselves). Republican leadership refuses to pause or repeal the gas tax, though surrounding states have paused theirs. All Alabamians, but especially lower-wage working people, are paying dearly for that never-ending tax hike. Republican leadership continues to ignore the hyper-inflation citizens are dealing with daily at the supermarket and discount stores as they try to put food on their tables and clothes on their kids. Surely, Republican leadership can look around and see the 32 other states returning tax surpluses to the people. Many Alabama Republicans seem unable to even entertain the (true) notion that a surplus of taxpayer funds is money that should rightfully be returned to the taxpayers rather than their personal piggybank to spend at will on whatever they see fit.
I used to balk at the mantra, “taxation is theft.” I also used to balk at the statement that, “There isn’t a dimes worth of difference between Republicans and Democrats.” I’ve come to the realization that, at least here in the state of Alabama in regards to taxing and spending, both of those statements are sadly true.
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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