Riley proposes more tax cuts

And why not? State tax collections are going through the roof, the economy is still growing, and the right kind of tax cuts will contribute to future growth by leaving money in the hands of those who provide the jobs and produce the labor.

So, are Gov. Riley's proposed tax cuts the "right kind" of tax cuts? It's a mixed bag, in my opinion.

(Mobile Press-Register) MONTGOMERY -- Alabama Gov. Bob Riley on Tuesday unveiled his economic plan for a potential second term, promising expanded tax cuts for individuals, families and retirees, along with a series of tax incentives for businesses.
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Riley proposed raising the income tax threshold -- the amount at which a family starts paying income taxes -- to $15,000 for a family of four. The increased threshold would apply only to households with taxable income of $100,000 or less. The governor said that would give more than 90 percent of Alabamians a tax cut.

This expands on a tax cut bill that Riley signed into law earlier this year. It was a good idea then, and it's a good idea now. Riley's proposal would cut income taxes for all households earning less than $100,000 a year, with low-income workers seeing the most significant reduction, as a percentage of income. I would prefer for the tax cut to apply to all taxpayers, but politics is politics.

The governor also proposed exempting the first $10,000 of retirement income from
personal income tax, regardless of the source and the amount a retiree earns.

This proposal would primarily benefit low-income retirees, many of whom rely on Social Security and corporate pensions for their wellbeing. It applies equally to all retirees, without regard to income. Another good idea.

Riley called for businesses with 25 or fewer workers to be able to deduct double the amount they spend on health care coverage on employees who earn $50,000 or less. Those workers, in turn, would be able to deduct double the amount of their individual premiums when figuring taxable personal income.

Insofar as this would make it more affordable for employees of small businesses to get health care coverage, I think it's probably a step in the right direction. It's encouraging that it allows employees to deduct their insurance premiums, not just employers. Why limit it to businesses with 25 or fewer workers, though?

While offering few specifics, Riley also proposed tax deductions for workers and businesses paying for some kinds of training.

I'm not crazy about this particular idea because it seeks to use government tax policy to influence the "proper" allocation of company resources - something that is essentially a management decision.

In a nod to a contentious issue that has dogged the governor in recent months, Riley repeated his call to change Alabama law that the governor argues requires annual reappraisal of property.

I agree with Roy Moore and Lucy Baxley on this one. Annual reappraisals are not required under Alabama law; Governor Riley was the first to interpret it that way. If he wants to return to four-year reappraisals, he could do so with the stroke of a pen; no change in the law is needed.

Other tax-cutting measures Riley has proposed are to:

Establish a $500 tax credit (a dollar-for-dollar reduction of a taxpayer's bill, as opposed to a deduction, which reduces taxable income), renewable for up to three years, for each job a business creates in the 25 Alabama counties with the highest unemployment rates.

Encouraging economic development in Alabama's poorest counties is a laudable goal, but giving favorable tax treatment to businesses who locate in those counties is not the best way to do it. Why address economic inequality by writing more inequality into the tax code? Every county in the state benefits from a tax and regulatory environment that is conducive to economic growth. What applies to one should apply to all.

Offer a tax credit to businesses who hire workers from high-unemployment sectors, such as enrollees of federal public assistance programs. The amount -- a percentage of the qualified employees' wages during the first year of employment -- would be tied to a similar federal tax credit.

Why not reduce the taxes and regulations that impede hiring - period? Government has no business using the tax code to influence basic business management decisions. It adds unnecessary complexity to the tax code, and it treats some workers more favorably than others, only because they are part of a "high-unemployment sector." If you are detecting a trend here - that I don't care much for government-directed "incentives" that serve to distort the natural operation of free markets - then you've figured me out.

Allow corporate taxpayers to deduct 20 percent of what they spend on certain research and development programs that qualify for a similar federal deduction.

Ditto. Why should spending on R&D get favorable tax treatment over spending on employee wages, or capital investment, or even office supplies? The allocation of resources is a decision that should be made according to the specific needs of individual businesses, not the desires of government.

Review all existing statutory incentives for existing and new industries.

Finally...something I support. No "incentives," no playing favorites. Unfortunately, I don't think that's what the Governor has in mind.

Create a "Rural Alabama Action Commission," modeled after the ongoing Black Belt Action Commission. The Black Belt panel has brought together civic, business and political leaders to assess programs and identify ways to improve the quality of life in one of Alabama's most economically depressed regions.

This proposal involves not a tax cut, but rather a useless waste of taxpayer money. But, hey...politics is politics.