Thursday, February 16, 2006
On this day:

How about a real tax cut?

An August sales tax holiday, proposed by Governor Riley earlier this year in his State of the State address, seems to be gaining quite a bit of support in the state legislature.

I don't care for the idea much, myself. The temptation is understandable, but the Governor and legislature should avoid election-year gimmicks like this. The tax holiday may be popular and showy, but it won't generate jobs or long-term economic growth. A better alternative would be to implement permanent tax cuts that have the added benefit of increasing incentives to produce and invest.

To begin with, why not pass Gov. Riley's bill to raise the income tax threshold and exemption levels, while phasing them in faster than he has proposed? That would provide immediate tax relief to every Alabamian who pays income taxes. It would also enhance the incentive to work, particularly among those lower-income wage-earners who would see the greatest marginal benefit from the tax cut.

Then, instead of luring companies to Alabama with "incentive packages" that unfairly favor "chosen" industries, how about providing real, lasting incentives to all of Alabama's businesses by eliminating the corporate income tax? The state shouldn't be in the business of picking winners and losers when it comes to economic development. Much of what we offer in the form of "incentive packages" to attact new business amounts to little more than corporate welfare. That's not fair to businesses that are already here, and it's not fair to the taxpayers who foot the bill. Eliminating both corporate welfare and the corporate income tax would do wonders for Alabama's business climate by stimulating investment and entrepreneurship, and by creating a level playing field that is open to all.

These measures - raising the income tax threshold with a fast phase-in, eliminating the corporate income tax, and doing away with corporate welfare "incentive packages" - would do more for economic growth in Alabama than a one-weekend-a-year sales tax holiday ever could. Meanwhile, be sure to keep your weekends in August open.