By a 68 to 32 percent margin, Alabama voters overwhelmingly rejected Governor Bob Riley’s $1.2 billion tax increase plan in a September 9 referendum.
Less than one year after he took office, Riley’s attempt to overhaul the tax system in order to fill a hole in the state budget and reform the state’s education finance system was snubbed by voters. The governor was reported to be “upbeat” about the results and “promising to shrink government spending and rebuild trust.”
Grover Norquist, whose DC pro-taxpayer group Americans for Tax Reform (ATR) opposed Riley’s plan, said, “Governor Riley is going to serve as a bad example” for other governors considering tax hikes instead of spending constraint, Norquist told CNN. “Years from now, little baby Republican governors will be told scary stories late at night, around the campfire, about the sad fate of governors like Riley who steal a billion dollars from their people.”
Ironically, Governing magazine earlier had named Riley its “Public Official of the Year.”
Because the Riley plan was rejected by a wide margin by voters from every demographic group in Alabama, “This probably helps to secure the cut-and-balance approach to the current state budget problems rather than the raise-and spend,” noted Larry Sabato, director of the University of Virginia’s Center for Politics.
Economic Impact Statement
In the weeks before the Alabama vote, Citizens for a Sound Economy, a Washington, DC-headquartered grassroots lobbying group, released a study documenting how Riley’s $1.2 billion tax increase plan would cost Alabama jobs, investment, and income.
According to CSE calculations, the tax hike would have cost every working person in Alabama $600 per year. The increases would have been felt by every Alabaman: homeowners, farmers, business owners, workers, vehicle owners, corporations, and those buying or refinancing real estate. CSE cited a Beacon Hill Institute study, “Tax Changes in Alabama: The Economic Consequences,” which concluded higher taxes would cost Alabama 24,000 jobs and an annual loss of $331 million in investment and $2.3 billion in disposable income.
“This report shows that these tax increases would be so harmful to Alabama and its citizens,” noted former House Majority Leader Dick Armey, co-chairman of CSE. “Alabamians are smart and they will vote this plan down and then the elected leaders of the state will have to find ways to cut spending.”
Proponents of the Riley plan argued Alabama needed the $1.2 billion tax increase to cover a $675 million budget deficit and boost spending on the state’s public schools. But CSE found spending in 2003 was $980 million higher than in 2002–a spending increase, in just one year, larger than the budget gap. CSE concluded spending cuts–rather than the largest tax increase in Alabama’s history–would be a better way to address the state’s budget woes.
John Skorburg is managing editor of Budget & Tax News. His email address is [email protected]. Max Pappas is a policy analyst for Citizens for a Sound Economy. His email address is [email protected].
For more information …
“Higher Taxes Would Harm Alabama,” the 17-page CSE report released in August 2003, is available at http://www.votenosept9.com or on the CSE Web site at http://www.cse.org/alabama/AlabamaReport.pdf.
The Beacon Hill Institute study, “Tax Changes in Alabama: The Economic Consequences,” is also available on the CSE Web site, at http://www.cse.org/informed/issues_template.php/1523.htm?isitsearch=1&search1=alabama.