---

Thomas Spencer
12/02/01

   When the Legislature convenes Tuesday to try to plug another hole in the state education budget, Brittani Kissel will be putting in a long night waiting tables, just a couple of miles from the Capitol at the Down the Street Cafe.

   Legislators will weigh competing plans that tinker with the tax code, hoping to find enough money on the margins to spare schools from a second straight year of spending cuts. But they won’t confront the long-neglected problems with the state’s tax system, problems that matter to Ms. Kissel.

   Alabama’s per capita tax revenues are the nation’s lowest. That means state agencies and the public school Ms. Kissel’s second-grade son, Ian, attends have less money to pay for teachers, textbooks, transportation and other expenses. Spending by Montgomery schools is about $1,229 less per student than the national average.
Alabama’s taxes are unbalanced. The 9 percent sales tax Ms. Kissel pays at the grocery store ranks among the nation’s highest rates, while Alabama’s property taxes are the nation’s lowest.

   Alabama’s tax revenues come disproportionately from low-income workers such as Ms. Kissel. She earns roughly $17,000 a year and pays almost 10 percent of her income in state and local taxes; a Montgomery family earning more than six times that amount pays less than 7 percent.

   While the Legislature is focused on the immediate crisis, a chorus of politicians, civic and business leaders is calling for a more fundamental change: replacing Alabama’s constitution and reforming the tax system embedded in it.

   It’s an old problem, but one gaining new urgency. According to new Census Bureau figures, the tax revenue gap between Alabama and other states is growing.

   Alabamians paid $2,007 per person in state and local taxes in 1999, compared with the national average of $2,992.

   In 1994, Alabama could have raised taxes by $200 million before reaching the per capita rate of No. 49 Mississippi. Now, Alabama would have to raise taxes by $840 million to equal Mississippi. That would amount to an increase of $191 per person.

   Low taxes are a bragging point to some, but they have consequences.

   In the fiscal year that ended Sept. 30, Alabama was the only state in the nation to spend less on schools than it did the previous year, according to analysts at the Education Commission of the States and the National Conference of State Legislatures.

   Alabama was among the first states to feel the effects of the economic slowdown. That happened because of problems with the state’s corporate income tax and because the state depends heavily on the sales tax.
Other sales tax-dependent states were able to shield schools from spending cuts, but the Alabama Constitution does not give state lawmakers the flexibility to make such adjustments in spending. By law and according to the state constitution, 90 percent of Alabama’s tax revenue is earmarked, meaning specific taxes must be spent for specific purposes. Alabama earmarks more of its revenue than any other state.

Limiting taxation

   The constitution, adopted 100 years ago last month, laid the foundation for the state’s unbalanced and unpredictable system for raising and spending tax dollars. The framers of the 1901 constitution wanted to keep government small and taxes low. To do this, they built caps on taxation into the constitution and designated where the money from certain taxes would be spent.

   “The more you limit power, the more you expand liberty,” delegate John W.A. Sanford of Montgomery said from the floor of the constitutional convention. “The more you curtail authority, the better it is for freedom. Therefore, I am for limiting the Legislature in its power of taxation to the utmost point that can safely be done.”

   In 1901, the primary tax was the property tax, and the constitution’s caps on it have been among the document’s most enduring provisions. State and local property tax revenues in Alabama are the nation’s lowest so low that the Public Affairs Research Council of Alabama has calculated they could be tripled without reaching the national average. The state’s 6.5-mill limit on state property taxes is still in effect today. On a $100,000 home, that’s $39 a year in state property tax, after homestead exemption. When the state’s personal and corporate income taxes were created in 1933, their rates also were set in the constitution.

   They have changed little since.

   With income and property taxes set by the constitution, state and local governments have come to rely on the sales tax, which they can raise without a constitutional amendment. Alabama ranks 15th in sales tax collections per capita; in several Alabama municipalities, the total sales tax rate is 9 percent.

`Test of our civilization’

   Even in 1901, former governors and state officials warned that the new constitution’s tax provisions would cripple state government.

   Delegate John T. Ashcraft of Florence argued on the convention floor that decisions on taxation should be left to the legislatures and local governments of the future.

   “We have great things in store for this state, but we are not going to continue to increase in financial prosperity ... without making upon us corresponding demands for progress in all the other departments of government; and it is only through this means of levying a tax upon the property in this state that we can make this political, social and educational progress,” Ashcraft said.

   On the eve of the vote on adopting the constitution, Birmingham school Superintendent John H. Phillips wrote:

   “The attitude of the state towards the general education of all the people is the chief test of our civilization. In the light of the Constitution, where do we stand? It is questionable whether the new constitution will remedy a single defect in our state school system; it is doubtful that the general status of education will be improved. One thing is certain No provision has been made for future growth and development.”

Return to: Editorial Index