September 15, 2011
Editorial
THE ISSUE It may be easy for cities to raise their sales-tax rate, but it's sure not rational or right.
The problem with being ranked No. 1 is that it's hard to stay on top. Almost every week, it seems, someone does something to shake up the rankings. This week, it was Trussville's city government.
What, you thought we were talking college football?
No. We're talking sales tax rankings. The Trussville City Council on Tuesday approved a 1-cent sales tax increase, raising that city's combined state, county and city levy from 9 cents to 10 cents on the dollar. When the increase goes into effect Nov. 1, Trussville will join Birmingham and a growing number of other local cities at the top of the heap in Jefferson County with a 10-percent sale tax rate.
You may recall Birmingham, with its 10-cent combined general sales tax, earlier this year was tied with Montgomery for the highest combined sales tax in the country for cities with a population of 200,000, according to the Tax Foundation, a nonpartisan tax research group in Washington, D.C.
Many of the cities in Jefferson County have jumped to double-digit combined sales taxes in the past year: Rising to 10 percent were Gardendale (October), Bessemer (April), Brighton (April) and Hueytown (April). Fairfield, Fultondale, Irondale, Leeds, Lipscomb, Midfield and Tarrant already were collecting 10 cents on the dollar in sales taxes.
Shelby County is starting to see a move toward 9 percent combined sales taxes. (Its county tax is 1 percent while Jefferson County's is 2 - call it the Larry Langford effect.) Vincent is already at 9 percent, and the Montevallo City Council is scheduled on Sept. 26 to vote on a 1-cent increase to 9 cents in combined sales taxes.
The explanations for what these cities plan to do with the extra money sound rational enough. Montevallo, for example, wants to revitalize its downtown and have a capital reserve fund to use on improving City Hall and other public buildings.
But as tax policy, raising sales taxes to extreme levels is anything but rational. It may be easy - cities can raise sales taxes without going to the Legislature for permission - but it isn't rational or right. All sales-tax hikes do is make Alabama's upsidedown tax system even more upside-down.
The state's tax structure is upside-down because it is so unfair. Low- and middle-income families pay twice the share of their incomes in state and local taxes that wealthier families do. A big reason is because of high sales taxes.
Alabama families in the lowest 20 percent of income ($10,400 a year average income) pay 4 percent of their incomes on general sales tax, according to a recent report by the Institute on Taxation & Economic Policy. That compares to 0.6 percent of the incomes of Alabama families in the top 1 percent of income (an average of $1.2 million a year) spent on general sales tax.
Adding injury to insult, Alabama is one of just two states (the other is Thank God for Mississippi) that don't offer some kind of state sales tax relief on food. Other states exempt food from sales tax, reduce the sales tax on food, or offer tax credits to poor families to offset some of the cost of the sales tax on food.
Even though Alabama is one of the lowest-tax states in the country (ahead of only South Carolina in the amount collected per person, according to recent Census data), it doesn't feel that way to low- and even middle-income families.
With growing numbers of cities in the Birmingham area and around the state opting for sales tax increases to restock their coffers, it will only get worse for those families.