Amy Traub

Let’s Hear It For Tax Cuts!

Usually, it's the conservatives you expect to hear calling for tax cuts and throwing big, champagne-soaked parties when they get passed. But in Alabama this month, the policy on the table wasn't to enact Bush-style tax cuts for wealthy individuals or publicly-subsidized windfalls for profitable corporations. Instead, Alabama is making their tax system a little more fair by reducing the income tax burden on the state's working poor.

That's a tax cut for progressives to get excited about.

Alabama is the only state in the nation that taxes the income of working people making less than $10,000 a year. Families with two children in the Cotton State owe income tax the moment they earn a paltry $4,600 -- well below the federal poverty line. Not only is such a tax system regressive, but it punishes work, setting a state-sponsored roadblock in the path of people struggling to work their way out of poverty.

But it won't be that way for much longer. In a rare feat of bipartisan cooperation, the Alabama state legislature voted earlier this month to raise the annual income level at which Alabamians start paying state income taxes to $12,500 for a family of four. The state's Republican Governor, Bob Riley, signed the bill this week. The new legislation will mean annual savings of $260 for a family of four earning $15,000 -- not an insubstantial amount.

Still, it's a modest victory. Alabama will hardly be transformed into a beacon of progressive taxation. Along with 19 other states, it will still levy regressive state income taxes on working families below the poverty line. Even worse is that the lost state revenue, which will come out of the education budget, isn't being immediately replaced. But making the nation's most inequitable tax system a little more fair to state's poorest workers is a progressive triumph nonetheless, and the state's progressive coalition, Alabama Arise, deserves hearty congratulations for policy success in an often-hostile environment.

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Posted at 4:59 PM, Apr 20, 2006 in Economic Opportunity | Tax Policy
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