Bentley concedes eliminating deductions is a tax hike, discusses asking Obama for Medicaid waiver

Gov. Robert Bentley (R-Ala.) (Photo: YouTube)

BIRMINGHAM, Ala. — During an appearance on the Matt Murphy Show on Monday, Alabama Gov. Robert Bentley conceded that his recently proposed idea to eliminate certain state income tax deductions would constitute a tax hike on the people of Alabama.

As part of his efforts to patch a $260 million hole in the state’s General Fund Budget, the governor had previously discussed the possibility of revoking Alabamians’ ability to deduct the amount they pay in federal income taxes from their state income taxes, as well as eliminating the deduction for FICA payments — the 7.65 percent from employees’ paychecks that goes toward Social Security and Medicare.

“I am not for raising taxes and this actually would not be raising taxes,” he said at the time. “It would be taking away some deductions. That is certainly one of the things we’ll be looking at.”

According to Legislative Fiscal Office numbers cited by the Birmingham News, eliminating those two deductions could bring in an additional $694 million annually.

“It’s pretty clear to the average Alabamian that if you eliminate a tax deduction that they’ve been able to take on their taxes, then that is, in effect, a tax increase for that individual family, would you not agree?” Murphy asked Bentley during Monday’s interview.

“Yes, I would,” the governor replied. “But what I was talking about — it is changing the structure, but it’s not actually raising a new, un-existing tax, like raising a cigarette tax or raising another tax. Are some people going to pay more because they will not have a deduction off of that tax? Yes. I was talking about the overall structure of the tax itself, other than the deduction. We’re not creating a new tax on something. That’s what I was talking about.”

The governor touted the efforts he and the Republican-controlled Legislature have made to shrink the size of the state’s government, but ultimately said he still believes the state government needs more money to operate.

“For the last four years, we have really worked hard to streamline government,” he said. “We have made it more efficient. We have saved $1.2 billion annually… and we have actually cut the size of government by twelve-and-a-half percent. There’s no state in the country that has cut their government… like we have. And no one has saved that amount of money — percentage-wise — of their budget. And we’re going to continue to do that. But even doing all of that, we still don’t have enough to make things work the way they should.”

Murphy then moved to another hot topic — Medicaid expansion. The governor repeatedly stated during his first term and re-election campaign that he would not expand Medicaid “under ObamaCare,” but made waves last week when he signaled for the first time that he was open to negotiating with the Obama Administration.

“I’ve said that I’m not going to expand Medicaid, and I’m not,” Bentley told Murphy. “What I was talking about is if the federal government would give me block grants — that means gives us the money with no strings attached, basically — so that we could help — help — those in the 100 to 138 percent poverty level that are already working or in workforce training.”

The governor’s “100 to 138 percent (of) poverty level” comment is a direct reference to ObamaCare’s plan, which calls on the states to expand Medicaid to cover individuals who are making up to 138 percent of the poverty level. The proposal Bentley is weighing — often referred to as a “private option” — would funnel federal tax dollars through the state government and into private insurers, who would cover the uninsured individuals.

Arkansas created a “private option” that was widely panned by conservative groups as “Medicaid expansion by another name.”

The core problem Republican governors have had with expanding Medicaid in any form is that the Obama Administration has to sign off on any proposal. For instance, Bentley has mentioned some form of work or workforce training requirement for new individuals receiving insurance under his plan, but similar requirements in Pennsylvania were dropped — or at least drastically modified — when the Obama Administration balked.

On Monday, Gov. Bentley conceded that it was unlikely that the Obama Administration would agree to the ideas he has mentioned so far.

“The chances are that the federal government’s not going to do that,” Bentley said. “But if the federal government would give me the block grant money and let me design it through Blue Cross or United Health or someone like that, (we could) let them design a program to help people temporarily as they try to better themselves with workforce training and those in the lower socioeconomic group, but they have to be working.”