Heritage Economist: Bentley should abolish state income tax, not push tax hikes

(Video Above: Heritage Foundation Chief Economist Steve Moore discusses Gov. Bentley tax hike proposal)

BIRMINGHAM, Ala. — In video for the Alabama Policy Institute (API), Heritage Foundation Chief Economist Steve Moore says Governor Bentley’s proposed tax increases are the wrong way to increase revenue for the state, and in fact will only serve to drive businesses and workers—the real sources of growth—away from the state.

“When states raise their taxes, especially when they raise their tax rates, that it actually leads to jobs leaving the state, it leads to higher unemployment, it leads to income decline in the state,” Moore said. “The problem with the Alabama budget right now is that the state is not growing fast enough, not enough jobs are being created. If you raise taxes on the business creators and on the workers, and on the investors, you’re going to get less businesses and you’re going to get less workers, and less investors. Under that kind of circumstance, you’re actually going to have higher unemployment, so I don’t get the logic behind raising taxes to try to balance the budget.”

Instead Moore recommends a structurally lower tax system, including making Alabama the 10th state to abolish the state income tax.

“The goal of Alabama should be to be more like Texas, not to be more like New York, where taxes keep going up year after year, and jobs and businesses keep leaving,” Moore quipped.

API Vice President Katherine Robertson also expressed concerns on Tuesday that the Governor’s proposed tax increases are not “dead on arrival” in the legislature, as was previously hoped.

“As the Alabama Legislature considers various proposals for closing the budget gap in our state General Fund, API continues to push for reforms to the very programs that are causing repeated budget shortfalls as an alternative to raising taxes,” Robertson said.

API is publishing two new research papers in the coming weeks, focusing on cost-saving reforms the legislature can consider in place of the Governor’s tax increases.

“Advertising higher taxes as the only option for closing the budget gap without cutting government services presents a false choice,” said API’s press release accompanying the video. “Rather, the current budget crisis should serve as an impetus for substantive reforms that tackle the real drivers behind the shortfall and will provide the state financial stability for the long-term. Alabama’s lawmakers should continue on in this worthy pursuit and stay true to their campaign promises.”

Pieces of Governor Bentley’s proposed $541 million tax increase have Republican sponsors in the legislature, but none of the tax hikes have been brought before a committee to this point. The legislature is expected to begin working on the budget next week, when they return from Spring Break.