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Tax loopholes hinder state’s attempt to budget

Published 7:59am Wednesday, April 20, 2011

Economic growth has returned to Alabama. Economists at The University of Alabama’s Center for Business and Economic Research expect the state’s economy to continue to pick up steam in 2011, with growth around 3.4 percent. That is good news for the future, but it matters little if your immediate present is one where you can’t find a job.

Jobs have been slower to recover than the overall economy. Alabama’s unemployment remains at 9.7 percent, about a half point greater than the rest of the country. We seem to be stuck in low gear on the jobs front, making progress but not nearly fast enough. Small businesses are still feeling the pinch, and until these local firms start to pick up, we will see anemic job growth.

Many of us in the House and Senate are frustrated with the inaction on jobs during the 2011 legislative session. It should have been the first priority for the new leadership that was swept into power in the last year’s elections. There has not been one major piece of legislation passed either the House or the Senate that is designed to help create jobs. We spend our time on peripheral issues and bills geared more toward public relations rather than improving employment.

In fact, the legislation we are in the process of passing is guaranteed to lose jobs, not create them, and it absolutely doesn’t have to be that way.

The problem is the two state budgets working their way through the Legislature. The education budget and the state General Fund budget will eliminate thousands of important jobs in across the state, hurt vital things like schools, and continue to pinch small local businesses that are the engine for new job growth.

People like teachers and public health nurses live in our communities and spend money locally, the customers local small businesses depend on. Cutting these jobs, and also cutting the pay of those that remain, will have a direct and severe negative impact in our local economy. We can and should restore funding to save these jobs, and we can do it without burdening working families or local business.

The answer is to close loopholes that make Alabama a standing joke among major out-of-state corporations. Loopholes are not exemptions passed by the Legislature or the voters, they are gimmicks and shell games developed by armies of tax lawyers and accountants that make a mockery of our tax system.

How bad is corporate tax avoidance? Most recent figures from the Alabama Department of Revenue showed in 2008 there were 1,761 major companies doing business here and reporting income to the federal government of $413 billion, while paying no Alabama income tax. There were 16 companies making more than $1 billion each that paid no state income tax.

Because Alabama allows tax loopholes that no other state permits, a major company like Exxon can pay less state income tax than a mechanic or secretary. It is unfair, and it must stop.

Making these corporations pay some taxes will inject more money into our local economy by restoring the job lost in education and other public works. Moreover, by making these corporations pay their fair share we level the playing field for local business that cannot or will not exploit loopholes or use shell games.

To clearly see how bad is the problem of corporate loopholes are, take the fact that General Fund revenue comes primarily from three industries: oil, insurance, and banking. These are the three top industries thriving with the economic recovery, with big oil making historic profits at up to $4 per gallon. Yet revenue from corporate sources has actually declined. Making big oil companies pay at least some Alabama income tax will not add one penny to the spiraling cost of gas, but it will save hundreds of local jobs.

There are twelve bills sponsored by Alabama House Democrats to close loopholes and make corporations pay their fair share. We should act on these and stop the abuses before we pass the budgets. Yet not one hearing has been scheduled by the leadership on them.

We are on the verge of losing thousands of teachers, juvenile probation officers, public health nurses, and other vital public employees. These are good people who do important work. They are also important parts of our local and state economy, and we should do whatever we can to save their jobs and keep them working.

Johnny Mack Morrow is a state representative for Franklin County. His column appears each Wednesday.

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