Tax cuts to working families without hurting schools
Published 12:00 am Tuesday, March 21, 2006
The Knight-Lindsey plan moves Alabama in the right direction
Last week the House unanimously passed a tax cut for working families. The Knight-Lindsey plan raised the threshold when income taxes are collected from $4600 to $12,400, and raises the deduction for children from $300 to $500. It will provide immediate and guaranteed relief to most Alabama families, but especially those working parents that are making under $20,000. A family of four making $18,000 a year will see a $340 tax cut next year.
Alabama’s tax system is the most unfair in the nation. The less you make, the more you pay in taxes out of your wages. A parent making $20,000 a year (what you’d get with a $10 an hour job) pays income taxes much sooner than any other state, but when sales taxes on necessities like food and clothing are added in, they pay much more for taxes out of their family budget than those who make $100,000 or more.
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It is never great paying taxes, but the fact is that those making over $100,000 pay less tax here than almost any other state. The Department of Commerce rated Alabama 49th in the nation for taxes on upper income families, with the lowest property tax in the nation and one of the lowest overall income tax rates. While upper income folks still pay tax on food and clothing, the staples take up much less of their total income.
There were several tax-cut plans, but the Knight-Lindsey plan is the only proposal that will take effect immediately. The bill provides a permanent and immediate tax cut targeted toward working families who are at the lower end of the economic ladder. Under the plan, 80 percent of working families that are tax filers get much-needed relief. This is the right plan, and the unanimous vote of the House reflects that.
The governor had proposed plan that would have given a tax cut to families making up to $200,000 a year. While it’s nice to give tax cuts in an election year, the problem with this plan is that it would take $133 to $148 million from the education budget when fully implemented over five years. In order to provide someone making a lot of money a six dollar a month tax cut, we would have to take at least $150 per student out of the classroom.
Could we justify cutting school budgets to provide election year tax cuts to everyone, including those doing well? The answer was no.
Not only was the governor’s plan expensive, it was also risky. While the proposal offered tax relief in the event of future economic fortunes, the plan offered no tax cut at all in the event that our economy takes a downturn.
The Knight-Lindsey provides relief to those paying the heaviest burden while making sure earmarked dollars get to the classroom. Families up to $70,000 will see a tax cut, and those under $20,000 will see significant relief. The price of this tax cut is between $50 to $60 million, and the costs will be recovered in large part by using interest earnings from the education rainy day fund, which was fully replenished by this year’s education budget.
The Knight-Lindsey plan does not raise taxes on anyone; it helps working families while protecting schools. Some will complain that higher income folks could have been included in the tax cut, but I’d like to see where they would make the cuts in education to pay for them.
Jesus tells us in Matthew that what we do to the least of us, we do to him. I believe the House passed a tax cut bill that truly addresses the plight of the least among us. When it is signed into law, it will be a great day in Alabama.