Testimony from Arise’s Kimble Forrister on ‘flat tax’ proposal

Arise’s Kimble Forrister testified before the state Senate’s education budget committee Wednesday, April 29, 2015, about SB 409. The bill would raise income taxes on the lowest-paid Alabamians but cut taxes for the top 1 percent by thousands of dollars on average. The committee carried the bill over at the sponsor’s request, but it could return later this year. Here’s the full text of Forrister’s prepared remarks:

“Alabama Arise believes that Alabama can’t move forward as long as we have an outdated, upside-down tax system. Several church bodies have passed resolutions calling for lower taxes for those who pay too much and higher taxes for those who pay too little. As it stands now, middle-income workers pay twice the share of income paid by the top 1 percent in state and local taxes.

“Alabama Arise worked closely with Rep. John Knight and Gov. Bob Riley in 2006 to raise Alabama’s income tax threshold for a family of four from $4,600 (worst in the nation) to $12,600 (now worst in the nation again). No state would tax that family except Alabama. In fact, very few states still tax workers whose income is below the poverty line.

“Under SB 409 as written, millionaires get a great deal: a tax cut of nearly $4,000 on average. At the lower end, Alabama families would pay income tax on their first $100 of income. No other state does this. In fact, every other state with a flat tax has created some mechanism to exempt families at $12,600 from the income tax.

“One such approach is Colorado’s, where a 4.25 percent flat tax is imposed on federal taxable income, not adjusted gross income (AGI). It’s just as simple as SB 409, but far more family-friendly. Instead of paying 2.75 percent of line 37, you’d pay 4.25 percent of line 43: Taxable Income. The result would be lower taxes at all income levels, on average, and the overall effect would be more revenue-neutral than SB 409 is now.

“Another approach is Pennsylvania’s, where the flat tax is softened by a tax forgiveness provision that applies only to lower-income families. Those who qualify would pay less, giving a break to low-income people and retirees.

“Finally, there’s the possibility of a state Earned Income Tax Credit, which half of the states now have. If we designed one at 10 percent of the federal EITC, it would reduce total revenue by $137 million, and the bottom quintile would no longer be the only quintile that would pay more under SB 409. Thank you for your time.”