John and Jim: A story of Alabama’s taxes
Published 12:00 am Monday, October 3, 2005
You have two friends who you care for equally. One of them is named John. One of them is named Jim.
John is supporting three kids by himself after a failed marriage and earns $15,000 a year hauling sheetrock. Jim is a single investment baker earning $250,000 a year.
Now, you need to ask your friends for a $10,000 gift to help pay the salary of your other buddy, Josh, the State Trooper (bear with me). What would be the fairest way to ask your two friends, John and Jim, for the gift? Ask for $5,000 from each? Just ask John for the $10,000 and hope his kids enjoy eating off-brand Spaghetti-O’s three meals a day? Or ask Jim for $9500 and ask John to just chip in $500 bucks he had set aside for new school clothes?
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No. Clearly, the fairest, best way to ask for the money is to just ask Jim for the whole amount. Will Jim ever genuinely miss that last $500 bucks? Unless he’s throwing his money around like Richard Scrushy on a bender at Mardi Gras, not likely. So why even bother John, who needs every penny he can get his hard-worked hands on?
Because you’re the state of Alabama, of course, owner of arguably the most regressive tax structure in the nation according to the indispensable “Alabama Tax and Budget Handbook,” released recently by tax reform proponents Arise Citizen’s Policy Project and VOICES for Alabama’s Children.
The booklet looks at the hard cold facts of Alabama’s tax code and shows that if you happen to be John, the facts are going to be harder and colder than anywhere else in the nation. A single parent like John, supporting three children and making earning a poverty-line salary of $15,219 in 2004, still owed the state $443 of income tax. No other state imposes so high a tax on a poverty-level earner. Very, very few states even tax someone making John’s wages at all; even Mississippi doesn’t assess an income tax until a family earns $19,600 a year. Alabama, by contrast, starts taxing a family of four at the sub-Burger King-cashier amount of $4,600 a year.
This might go down a little easier if our state made up for it by making the wealthy pay their fair share as well, but that’s not happening. As a member of Alabama’s top 1 percent of earners, Jim will pay, on average, only 3.8 percent of his yearly salary–that $9500 I mentioned earlier. Yes, I know, $9500 sounds like a lot…but when Jim had $240,500 left over, would he really miss it? And is there ANY way he’ll miss it more than John will miss that $443? But that $443’s only the beginning: on average, a member of the bottom 40 percent of Alabama’s earners like John will pay 10.5 percent of his wages in state taxes of one kind or another. $1,598 dollars of John’s $15,000 will go to Alabama.
That’s right: Alabama’s poorest citizens pay three times as much, percentage-wise, as the state’s wealthiest citizens. When our state needs $10,000 to pay Josh the Trooper or build a new school or provide a child with medical care, it asks John the lumber worker to chip in a greater share than Jim the banker. It does this in all sorts of unfair and/or just plain stupid methods, such as:
* The deduction on income taxes for children. Alabama first instituted an income tax in 1935 and set the initial deduction for a child dependent at $300. After 70 years of inflation, the deduction now stands at…$300, unsurprisingly the lowest in the nation. For an idea of how far out-of-date the deduction has become, consider that in 1935 $300 dollars would have bought 1,764 gallons of gasoline. Today it will buy 112.
* Applying the full sales tax on groceries. Alabama is one of only seven states that still allows for a full sales tax on groceries without any kind of rebate or credit for low- and middle-class families.
* Taxing corporate-owned timberland at laughably low property tax rates that force local governments to raise sales taxes to meet their budgets. (Despite the fact that more than two-thirds of Alabama is timberland, only two percent of the state’s property tax comes from this land.) And when sales taxes rise it’s the Johns of the state that suffer the most: Low-income workers pay as much as 7.3 percent of their income out in sales taxes while wealthy Alabamians pay as little as 1.1 percent.
Now, why bring up state policy in a local paper? Because nowhere in the state are there more Johns, nowhere in the state are there less Jims, than right here in the Black Belt. When these problems get fixed–when poor families get to keep more of their hard-earned income, when impoverished schools get the property tax funding they deserve, when John can buy those school clothes his kids deserve with the $500 bucks Jim could as well roll into a cigar and light up–there’s nowhere that stands to benefit more.
Lastly, I’m aware that this is not the first time I’ve raised most of these points before. But I am a Christian, and as clich/d as the question “What Would Jesus Do?” has become, in an issue such as this it continues to gnaw at me. What would Jesus do with John and Jim? Probably not ask John’s kids to go without while Jim buys an in-Hummer PlayStation, but if you’re the state of Alabama, what Jesus would do doesn’t really matter, does it?