Posted: 8/19/2003 11:41:16 AM EDT
[#6]
I found this point-for-point rebuttal of the e-mail referenced above pretty interesting. Frankly, I believe it is obvious that both pieces were inspired by an existing agenda and the actual truth probably lies somewhere in between. Both sides of this debate are "exaggerating" with everything they've got. I don't think the package has a snowball's chance of passing, but here is the proverbial "other side," FWIW: This is the truth about the Plan for Progress:
What They Say:
1) The Federal Income Tax deduction used to calculate State Income Tax is being eliminated? What does this mean? If your income is $60,000 and you pay $20,000 in Federal Income Tax, you currently pay 5% State tax on only $40,000 of income ($60,000 - $20,000). Bob Riley wants you to pay 5% on the whole $60,000 even though you NEVER RECEIVED $20,000 of it (the Federal Government has it).
NET EFFECT: $1000/year extra State tax out of your pocket for $60,000 income level.
The Truth:
First, the federal income tax deduction is only used in two other states and it is one of the most regressive portions of our current tax structure. Because wealthy individuals pay so much in federal income taxes, they get a disproportionate break in the amount that they pay in taxes in Alabama. The federal income tax deduction is really a break for the extremely wealthy. The poor and middle class get little or no benefit. The Plan for Progress makes taxes fair by eliminating this deduction.
In terms of the effect of this change on most working families, the example above fails to consider the increase in standard deductions for children from $300 to $2100. This change will work to offset the change caused by the elimination of the federal income tax deduction.
In addition, this example also fails to take into consideration that the elimination of the federal income tax deduction will also be offset by the significantly higher income tax threshold. A family of four currently begins paying taxes on $4,600 of annual income--that threshold is being raised to ~$20,000. This means that you will be taxed on ~$15,400 less income assuming you make $20,000 or more.
Overall, 67% of people in Alabama will pay the same or less in state income taxes.
What They Say:
2) Property Taxes will now be calculated based on 100% of market value rather than the 10% of market value that was used previously. Even though the State millage rate will be dropped from 6.5mills (.65%) to 3.5mills (.35%), and the homestead exemption for property you actually live on will increase from $4000 to $50,000, the NET EFFECT: If your home is worth more than $52,280, you will see a tax INCREASE.
Approximate rates: Home value: $60,000 - 32% increased property tax. $80,000 - 57% $100,000 - 66% $150,000 - 73% $250,000 - 78% ****These figures reflect the effect on the combination of your STATE and LOCAL Property Tax. The INCREASE of the STATE portion of the PROPERTY TAX is approximately 500% (5x's what you previously paid).
The Truth:
STATE property taxes will now be assessed at 100% of market value and 3.5 mills—but your LOCAL property taxes will remain the same. LOCAL property taxes will still be assessed at 10% of market value and will keep the same tax rate.
Your state property taxes are a very small portion of your overall property tax bill and it is the only the state portion that is changing. The numbers that the author of the original email has included are a gross distortion of the truth.
The Alabama Department of Finance has quoted the following percentages:
If you own a $60,000 home, the average increase is 12%, not 32%. $80,000: 29%, not 57% $100,000: 35%, not 66% $150,000: 35%, not 73% $250,000: 42%, not 78%
If the Plan for Progress passes, your property taxes will still be lower than every state around us, will still be less than half the national average, and will be 70% of the southeastern average.
What They Say:
3) "Alabamians over the age of 65 will be completely exempt from STATE property tax on their homes." Watch the language here. They will still pay the LOCAL taxes which is around 28mils.
The Truth:
Local taxes on homes will not be changed under this plan. All of the increase is on the state portion, which means that seniors will not pay one penny more in property tax on their homes. In addition, seniors are exempt from state income taxes on much of their pension income. All of these exemptions will be protected under this plan, and for the first time, the first $40,000 of pension income from IRAs, 401Ks, 403bs, 457s, and similar plans will be completely exempt from state income taxes. This will give Alabama one of the most senior-friendly tax systems in the country.
The plan also secures and stabilizes funding for important senior services such as funding for senior centers and meals for the elderly.
Consider the senior groups that have endorsed the Plan for Progress: Silver Haired Legislature, State Department for Senior Services, CASA (Care Assurance Systems for the Aging) of Marshall County.
What They Say:
4) A 4% state tax will be added to SERVICE charges. In other words, whenever you have any home repair, an oil change, a haircut, etc., it will cost you an additional $40 for every $1000 worth of service (they include the labor in this calculation too).
The Truth:
Based on the estimates provided by the Legislative Fiscal Office, the average Alabamian will pay about $25 per year in sales tax on services. This is a tax that is common in other states (Florida, Tennessee, and Mississippi all already tax these services). Furthermore, haircuts will not be taxed, nor will things like roof repair or installation of a new floor in your home.
Remember that the tax on services is a very small tax that pales in comparison to the income tax breaks most Alabamians will receive under this plan.
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