Alabama's constitution is silent about equal protection for citizens. But don't assume that everyone is treated alike -- especially when it comes to taxes. Consider the following two cases from Mobile County:

   Buchanan Lumber Co. specializes in hardwood, mostly for the wholesale trade. Bill Buchanan moved to Mobile in 1965, when he and his two brothers bought the company.

   The company, which has 13 acres near the Alabama State Docks, used to employ 115 workers when it ran a sawmill and supplied furniture-makers in the Carolinas. But demand dried up, forcing Buchanan Lumber to find other customers, many of them overseas. Now, its Mobile work force is down to 25, although the company continues to expand elsewhere, most recently with a sawmill at Aliceville, west of Tuscaloosa.

   Through good times and bad, the company has paid its taxes. This year, according to records in the county Revenue Commissioner's Office, the bill amounted to $5,876 on just the 13 acres in Mobile. The tax office values the land, excluding its buildings and machinery, at $570,500.

   Across town, according to revenue records, another parcel of land is appraised for taxes at almost the same figure -- $570,000. But the comparison ends there. And so does the tax fairness.

   A company listed in the records as C G Investment Venture paid just $38 in property taxes this year on this 19-acre tract at Grelot and Cody roads in sprawling west Mobile.

   Why does speculative property in the city's booming suburbs virtually escape taxation, while land in a family business, in an older area, bears the full rate?

   The answer is simple: Fairness disappeared 20 years ago under Amendment 373 to the state's constitution. The Alabama Farmers Federation, known as Alfa, which speaks for some of the state's wealthiest landowners, panicked legislators and voters into approving what amounts to a tax subsidy. People feared that honest appraisal of property in Alabama, which the federal courts had ordered to replace wildly disparate valuations, would invite confiscation.

   The Legislature could have calmed such fears by appraising all property for tax purposes at the actual value, effectively broadening the tax base. Legislators then could have lowered rates for all owners, while allowing specific relief for certain hardship cases, such as elderly people on low, fixed incomes. And legislators could have protected farmers and timber-growers in urban counties from rising values, thereby preserving green spaces around cities, by following the lead of states that appraise such property as if it sat in rural areas, rather than next to a shopping center or a subdivision.

   Alabama's Legislature may have been interested in all these sensible ideas, but not for long. Instead, legislators went along with Alfa and Gov. George Wallace to gut the state's capacity to levy fair property taxes.

   First, Amendment 373 required that business property be assessed for taxes at twice the rate of residential or agricultural property. (Property belonging to utilities is assessed at three times the rate.) Next, the amendment reduced the already low tax bite on agricultural land by as much as half or more. It did this through a unique and arbitrary trick known as "current use."

   Alabama applies current use to virtually any property, urban or rural, where owners claim to be growing something for sale. The tract may be a paper company's vast pine plantation miles from the nearest town. Or it may be a few acres next to a mall where a speculator has stuck some pine trees.

   Indeed, more than half the property on Mobile County's tax rolls has current use protection. As a result, the land in this category produces just 1 percent of the county's property taxes. Taxed at its fair market value, this land would yield $2.4 million in annual county taxes; taxed under current use, it yields $1.3 million, according to the county revenue office.

   This rip-off is particularly outrageous because speculators can sit on expensive urban property and pay next to nothing in taxes. Records at the courthouse show that C G Investment Venture put the pine-covered tract at Cody and Grelot roads -- an area fast building up with houses and apartments -- under current use in 1982. The Mobile County tax office, like others around the state, usually doesn't question an owner's request for such status so long as timber or hay is present.

   In such cases, the law requires that Freda Roberts, Mobile County's revenue commissioner, ignore the property's actual use in levying taxes. Instead, she must apply an arcane formula that Alfa helped devise. This formula is supposed to reflect the productive value of the land, but its main function is to prevent fair taxation. Under this arbitrary rule, the 19-acre tract is valued at just $387 per acre for taxes, though it is prime for development.

   (Imagine such a tract situated in the boondocks of Mobile County, far from any development. On the market, it would be worth, on average, $804 per acre for the bare land alone. That figure comes from a recent report, prepared by the Extension Service at Auburn University, on comparative land values in Alabama.)

   In addition to current use, the constitution limits taxation of agricultural land to 10 percent of its assessed value. So this crazy math further reduces the taxable value of the Cody and Grelot tract to $39 per acre. When the county multiplies that figure by the tax rate within the city limits, which is 0.0515, the tax bill is $2 per acre -- or $38 for the 19 acres.

   C G Investment Venture sold the property on June 30 to another company, Arlington Park Apartments, which plans an apartment complex there. The price was $912,871 -- or $48,046 per acre.

   Apologists for current use excuse such abuse of the tax system by pointing to a provision in the law that penalizes owners when they sell land for purposes other than agriculture. The assessor can apply the full tax rate to the property for the present year and two previous years.

   But sellers typically just pass the extra taxes on for the new owners to pay, or tack the amount to the selling price. Meanwhile, they keep the subsidies from all those previous years when their property qualified for current use.

   What a deal. In fact, tax experts say no other state treats its big landowners so tenderly as does Alabama. Nor does any other state follow Alabama in confusing legitimate protection of farmland with blatant favoritism.

   This favoritism becomes apparent when one weighs the equity of Alabama's property tax system against that of its neighbors.

   Mississippi, for example, generally has low tax rates, and protects farmland and timberland, too. But a simple comparison of tax bills along the Alabama-Mississippi border suggests that Mississippi landowners carry a fairer share of the tax burden in their state.

   Take the case of Sustainable Forests, a company in Chatom, 50 miles north of Mobile. It owns a tract of timberland that flows from Mobile County into George County, Miss. On the Alabama side, there are 309 acres; on the Mississippi side, 246 acres.

   Sustainable Forests paid $4.18 per acre in taxes on its Mississippi timberland for 1999, according to George County records.

   But in Alabama, where the land qualifies for current use, Sustainable Forests paid $1.67 per acre, Mobile County records show. Both states tax only the land and not the timber.

   Even before Amendment 373, Alabama's 1901 constitution starved public services by imposing miserly limits on property taxes. This condition led the Brookings Institution to conclude in 1932 that the constitution had created a "warped and distorted" tax system that tried to substitute a confusing jumble for fair property taxes.

   Today, the Alabama constitution continues to play favorites through clever schemes that protect privileged landowners. What this obsolete document can't do, however, is hide the folly of pampering timber corporations, speculators and other wealthy interests at the expense of public school children and poor families, as we shall see in the next installment of this editorial series.

Return to: Century of Shame, Introduction

Part 4: Faces from the Future

Reprinted with Permission from the Mobile Register.