Expand Medicaid and close Alabama’s health coverage gap

For years, Gov. Kay Ivey and legislators have said cost is the barrier to covering Alabamians with low incomes through Medicaid. However, thanks to new federal incentives for Medicaid expansion, any concerns about that barrier are gone. Now more than ever before, we have the opportunity to ensure no Alabamian has to choose between going to the doctor and putting food on the table.

More than 70% of Alabamians support Medicaid expansion, including 66% of Republican voters, according to a January 2022 poll, and opening up Medicaid coverage to adults with low incomes is the single biggest step Alabama can take to restore health, save our rural hospitals and boost our state’s economic recovery.

Who would gain coverage under Medicaid expansion?

Medicaid expansion would ensure coverage for nearly 300,000 Alabamians, including:

  • People who work low-wage jobs and can’t afford private coverage
  • Workers who are between jobs
  • Adults who are caring for children or older family members at home
  • People who have disabilities and are awaiting SSI determinations
  • Adult college students
  • Uninsured veterans

How would Medicaid expansion boost the economy?

Medicaid expansion would bring our federal tax dollars home to support:

  • Healthier families, workers and communities
  • Stronger rural hospitals and clinics
  • Stronger community mental health and substance use disorder services
  • A needed boost in jobs and revenue for state and local economies

How would Medicaid expansion keep people healthier?

Medicaid expansion would help Alabamians stay healthy by ensuring pathways to:

  • Regular primary care and preventive checkups
  • Earlier detection and treatment of serious health problems
  • Regular OB/GYN visits without referral
  • Less dependence on costly emergency care
  • Better health and greater financial peace of mind

How would Medicaid expansion reduce health disparities?

Medicaid expansion would promote health equity in Alabama by:

  • Reducing the racial/ethnic disparities in health coverage
  • Lowering the high rate of Black infant deaths
  • Lowering the high rate of Black maternal deaths
  • Covering chronic health conditions that disproportionately affect people of color and make them more vulnerable to COVID-19 complications

Bottom line

Medicaid expansion would save lives, create jobs and strengthen Alabama’s health care system. Closing the health coverage gap is one of the biggest policy changes available to move our state forward. The governor and the Legislature should embrace this opportunity to build a brighter, healthier future for Alabama.

Join our Cover Alabama campaign!

An end to Alabama’s coverage gap is within reach. Through our Cover Alabama campaign, Alabama Arise is working to ensure that every Alabamian can afford to get the health care they need when they need it. Visit coveralabama.org to learn more and add your name to our ever-growing list of supporters.

The workforce benefits of Medicaid expansion in Alabama

For nearly a decade, Alabama has been outside looking in on a good deal. While hundreds of thousands of Alabamians continue to struggle without health insurance, state leaders have failed to expand Medicaid. A few loud voices have politicized an issue that never should have been political. And our state has paid the price in lost dollars, lost jobs and lost lives.

Strong evidence suggests that having reliable access to health care encourages folks to work and keeps workers healthy. That’s one reason 39 states and the District of Columbia have recognized the importance of Medicaid expansion. They have chosen to ensure their residents can afford necessary medical care. They have prioritized a healthy populace and a stronger workforce over partisan politics.

Alabama is one of 11 states that has yet to expand Medicaid. And that inaction has left more than 220,000 Alabamians in a health coverage gap. A family of three must make less than $4,475 a year ‒ just 18% of the federal poverty level ‒ for the parents to qualify for Alabama Medicaid. But unless that family makes at least $24,860 a year, they will not qualify for subsidies to buy a private plan on the marketplace created under the Affordable Care Act.

Medicaid expansion would end that injustice and close that large coverage gap for adults with low incomes. It is the single best solution available for lawmakers to strengthen Alabama’s ailing health care system. And it is one of the best solutions to help cure many of our state’s economic and workforce woes.

Medicaid expansion would help Alabamians stay in the workforce

Some state officials have expressed concerns about Alabama’s labor force participation rate, which is lower than in many neighboring states. Fortunately, Medicaid expansion is a proven solution to help people join and stay in the workforce. States that have expanded Medicaid have seen a greater increase in labor force participation among people with incomes below 138% of the poverty line than states that have not expanded. These are the very people Alabama would help by closing the coverage gap.

As lawmakers grapple with how to increase workforce participation, it’s worth considering how many Alabamians have had to leave their jobs due to ailments that access to adequate health care could help prevent or solve. One in three adults in Alabama have a disability, according to 2022 CDC data, including nearly two out of every five veterans. Here, too, Medicaid expansion would help. People with disabilities are more likely to be employed in states that have expanded Medicaid than in states that haven’t.

The personal and economic harms of being uninsured are all too real. For many folks, going without health coverage means going without treatment for manageable illnesses and injuries. Those conditions often turn into long-term problems that prevent them from living healthy lives or returning to work. For example, imagine being an uninsured person with diabetes, a condition affecting nearly one in seven Alabamians. While severe, diabetes is detectable and treatable with regular care. However, if untreated, it can cause disability or long-term and permanent damage like foot amputation or vision loss.

That person is now living a more difficult life, and returning to work is now more difficult, if not impossible. These are the kinds of situations that uninsured Alabamians face every day. And expanding Medicaid coverage could prevent this type of needless suffering.

Health care policy is workforce policy

As Alabama works hard to attract industries and new workers, adequate health coverage is essential infrastructure. Why would a family move to Alabama (instead of elsewhere) for employment opportunities when our state refuses to invest in workers’ health like so many other states do? And how long will businesses keep relocating to Alabama if our workforce isn’t healthy enough to fill vacant jobs? They could just as easily go to Arkansas, Louisiana, Kentucky, Missouri, Oklahoma, Virginia or West Virginia instead.

These mostly conservative Southern states all recognized the importance of a healthy workforce and chose to expand Medicaid. That’s because it is impossible to separate health care policy from workforce policy. In fact, health care policy is workforce policy.

Medicaid expansion would help working Alabamians stay healthier and more productive. Expansion also likely would boost labor force participation in Alabama, as it has in other states. Arguments to the contrary lack strong evidence and rely on false stereotypes about low-wage workers.

Many of the Alabamians who stand to benefit most from Medicaid expansion are working folks caught in the coverage gap. Having access to health insurance, regardless of the source, doesn’t keep people from working. But you know what does? Having an unhealthy workforce with folks who struggle to afford health care and are forced to work when they’re sick. Or worse: being pushed out of the workforce entirely due to ailments that worsen or go unaddressed because people can’t afford treatment for them.

Medicaid expansion would keep a wide range of workers healthier

Alabamians work hard every day to provide for themselves and their families. But hundreds of thousands of them aren’t paid enough to afford health coverage. Fast food workers, cashiers, carpenters and hotel desk clerks are just a few examples of the people who work hard at low-paying but essential jobs that often don’t provide health insurance. They are among the Alabamians who would benefit most from expanding Medicaid.

Graphic of the top nine occupations that would benefit from expanding Medicaid in Alabama: food service, sales, construction, cleaning and maintenance, office and administrative support, production, transportation, personal care and support, and installation and repair.

The false belief that expanding health coverage would somehow disincentivize work is insulting to Alabamians who work every day to provide for their families but don’t receive health insurance through their employers. Improving health care access is workforce development, and having health insurance makes working possible.

Likewise, the unfounded notion that many people would drop out of the workforce after gaining health coverage is not grounded in reality. In fact, it is fundamentally rooted in outdated, false stereotypes about people with low incomes. And it takes an absurdly reductive view of the economic realities of everyday life.

Health insurance helps people get health care, but it doesn’t pay for other needs like food, clothing or housing. Indeed, many Alabamians who want a job can’t enter the workforce ‒ or have to leave it ‒ because they can’t afford the health care they need to stay healthy enough to work.

Other states have shown Medicaid expansion is an economic boost

For 12 years, Alabama has failed to accept generous federal incentives to expand Medicaid to cover adults with low incomes. In that time, our lawmakers have watched as other fiscally conservative states (including Kentucky, Louisiana, Montana and Utah) expanded Medicaid and remained budgetarily sound. For a decade, expansion states have enjoyed budget savings, revenue gains and overall economic growth after expansion.

National research has shown no significant increases in spending from state funds as a result of Medicaid expansion. These positive effects occurred in expansion states even as Medicaid enrollment growth initially exceeded projections in many states.

Examples abound. Studies in Louisiana and Montana showed that expansion pumped large amounts of federal money into those states’ economies and produced significant state budget savings. In Kentucky, Medicaid expansion infused $1.16 billion into the state’s health care system and overall economy in the first year of expansion. Similarly, after Medicaid expansion, Louisiana also showed increases in overall state and local tax receipts.

Every year that Alabama has refused to expand Medicaid, Alabamians’ federal tax dollars have helped foot the bill for Medicaid expansion in other states. More than 220,000 Alabamians remain caught in a health coverage gap that expansion would close. Another 120,000 who would benefit from expansion continue to stretch to pay for coverage they can’t truly afford. All the while, our tax dollars are being used to fund expansion elsewhere.

Medicaid expansion would make economic sense for Alabama

Expansion opponents sometimes acknowledge the financial benefits of expanding Medicaid. But they often underplay the magnitude of these potential gains. Medicaid expansion could save Alabama nearly $400 million a year over the next six years, a report by the Public Affairs Research Council of Alabama (PARCA) found.

Those savings ‒ from the federal government covering expenses that Alabama now pays ‒ would be more than enough to cover the state cost for expansion, according to PARCA. Medicaid expansion also would generate nearly $2 billion of annual economic growth for Alabama during those six years, PARCA projected.

The benefits wouldn’t stop there. Medicaid expansion also would support more than 20,000 new jobs a year on average, PARCA projected. It would extend health coverage to more than 220,000 folks who don’t have it. And most importantly, it would save lives.

A graph showing the economic impact of Medicaid expansion, including saving the state nearly $400 million per year.

Expanding Medicaid would save the state money, boost economic growth and create jobs. For many newly insured Alabamians, Medicaid coverage would help them stay healthy enough to keep working. For others, it would provide the medical security they need to join or rejoin the workforce.

Alabama can’t afford not to expand Medicaid

Alabamians with low incomes pay twice the share of income in state and local taxes that the wealthiest households pay. Adding to that injustice, Alabama’s overall tax system raises much less money for vital public services than most other states. In 2019, only about 38% of our state revenue came from state taxes ‒ one of the lowest percentages in the nation. Meanwhile, Alabama gets almost as much of its revenue (nearly 37%) from federal funds.

Federal funds are already a significant source of state revenue in Alabama and have been for decades. That money has helped us meet vital needs like educating our children, maintaining our roads and keeping our water clean.

Medicaid expansion would meet another vital need for our state: saving and improving lives. When it comes to expansion, Alabama would be getting a fantastic deal: a 9-to-1 federal match of state funds. That’s nearly 20 percentage points higher than the matching rate Alabama usually gets for other Medicaid services. And as already mentioned, Medicaid expansion could save Alabama enough money on other services to cover most or all of the state cost.

Why not take the 90% the federal government is offering to fund Medicaid expansion in exchange for a 10% state match? Why not invest in a healthier future for Alabama?

Alabamians across the political spectrum agree: It’s time to expand Medicaid

While some have tried to make Medicaid expansion into a partisan issue, it simply isn’t. Several other Southern states, and conservative states elsewhere in the country, already have expanded Medicaid. Some even did so by bypassing their state legislatures through ballot measures (an option we lack in Alabama). This isn’t a partisan issue, though many in our state want to make it one.

Graphs showing support for Medicaid expansion in Alabama.

To argue that we shouldn’t help our neighbors see a doctor based on the false premise that it might encourage them not to work is deeply troubling. Is that the state we want to be: one that pits the health of its people against cynical political posturing? That’s not what Arise wants, and it’s not what the vast majority of Alabamians want either.

Alabama is one of only 11 states that have not yet accepted the generous federal incentives to expand Medicaid. Most people across our state want that to change. More than seven in 10 Alabamians (71.5%) support Medicaid expansion, an Arise poll found last year. That includes nearly two-thirds of Republican voters.

Alabama needs to do the right thing by prioritizing the health of our people and our workforce over the political gamesmanship that so often dictates state decision-making. It’s time to ensure health coverage for all of our neighbors who can’t afford it.

It’s the only decision that makes sense, and it’s a choice that would help make this the state our people deserve. Let’s put the people of Alabama first and expand Medicaid.

The federal income tax deduction is skewed and wrong for Alabama

Wealthy people don’t need a huge, skewed income tax break ‒ but Alabama gives them exactly that. This loophole, called the federal income tax (FIT) deduction, overwhelmingly benefits rich households. It’s an imbalanced tax giveaway that reduces funding for public schools. And it increases the state’s reliance on regressive revenue sources, like the sales tax on groceries, that fall hardest on people who are striving to make ends meet.

The federal income tax (FIT) deduction is unfair and largely benefits the wealthiest Alabamians. The graphic has money bags of different sizes to show the deduction's average estimated value at different income levels. For low-income Alabamians, the average is $3. For median taxpayers, it's $67. For upper-income Alabamians, it's $549. And for the top 1%, it's $12,901. Source: Institute on Taxation and Economic Policy.

A 1965 constitutional amendment created the loophole by allowing Alabamians to deduct federal income tax payments from their income before calculating state income taxes. This deduction doesn’t exist in most other states ‒ and for good reason! Only Alabama and Iowa allow individuals to deduct all federal income tax payments. (Louisiana had an FIT deduction until 2022.) Three other states ‒ Missouri, Montana and Oregon ‒ cap their FIT deductions at around $5,000. There, as here, the benefits go largely to those with the highest incomes.

A tax break for those who need it least

The FIT deduction primarily benefits wealthy households and does little or nothing for families with low and moderate incomes. Unlike Alabama, where the state income tax rate is nearly flat (with most people paying the same percentage of their income), the federal government taxes people at higher rates as their income goes up. This means rich people can use Alabama’s FIT deduction to exclude much more of their total income when calculating state income taxes. And that means the FIT deduction gives the biggest breaks to those who can most afford to pay to fund education, health care and other vital needs.

By contrast, the FIT deduction offers comparatively little benefit to people with low or moderate incomes. For Alabamians with incomes under $22,000, the FIT deduction is worth an average of $3 a year, the Institute on Taxation and Economic Policy (ITEP) estimates. In fact, for most people in our state, the deduction is worth less than $135 a year. But for the richest 1% in Alabama ‒ whose average income is $1.28 million ‒ the deduction is worth an average of $12,901 a year, ITEP estimates.

A path to untax groceries and support public schools

Ending or capping the FIT deduction would be an important step to improve Alabama’s upside-down tax system. And the effects for individual tax filers would be relatively modest. Even for the richest Alabamians, eliminating the FIT deduction would increase their taxes by only around 1% of total income on average. For most people in our state, the increase would be significantly less ‒ or none at all.

By ending this upside-down tax break for the rich, Alabama lawmakers could generate $833 million in new revenue. More than 85% of that amount would come from the highest-paid 20% of residents. This money would empower Alabama to end the state grocery tax without cutting a dime of funding for public schools. And after untaxing groceries, lawmakers still would have more than $300 million in new revenue every year to strengthen investments in K-12 and higher education.

Bottom line

The FIT deduction is a nearly 60-year-old bad idea. It takes money away from our children’s schools. It forces the Legislature to tax groceries and other necessities instead of income from wealthy residents. And it provides a giant tax loophole for the richest people in our state. By abandoning this failed experiment, lawmakers can help make our state more just and inclusive and build a brighter future for every Alabamian.

A dire need for reform: How Alabama’s constitution is holding our state back

The 1901 Alabama Constitution is overreaching, poorly written and harmful to many of the people it governs. Its authors intentionally disenfranchised people of color, women and people with low incomes in an effort to silence them politically. The document also created barriers to governance for local elected officials. More than a century later, these barriers still limit opportunities for change at the local level today.

Alabama voters will have the opportunity on Nov. 8, 2022, to adopt a recompiled state constitution. This amendment would authorize changes such as removal of racist language and illegal provisions that have since been repealed. Arise is urging Alabamians to vote “Yes” on the recompilation in November. These changes wouldn’t address all of the problems with the state constitution. But they would move Alabama, and our constitution, in the right direction.

A shameful start

In his opening remarks, the president of the 1901 constitutional convention declared a major goal was “within the limits imposed by the federal Constitution, to establish white supremacy in this state.” The resulting document effectively removed the voting rights of African Americans and poor white people. By concentrating power in the hands of a few special interests, it allowed wealthy landowners to keep their property taxes low at the expense of school funding for low-income children.

Federal courts have overturned most of the discriminatory provisions, but the shameful evidence of this legacy persists in our constitution. This concentration of power remains an obstacle to effective local government. The constitution similarly hinders state officials from modernizing our tax system to serve Alabama’s current economic realities. And the document limits lawmakers’ ability to change policies that perpetuate the harmful and racist objectives overtly codified in 1901.

The home rule question

In Alabama, counties must seek constitutional amendments to conduct many routine functions of local government, known as home rule. At 977 amendments and counting, the Alabama constitution is 12 times longer than the average state constitution and 40 times longer than the U.S. Constitution. Because many amendments require a statewide vote, and because legislators can override many proposed local actions, the rights and privileges of people in one county are often granted or denied by residents of other counties that would be unaffected by such changes.

One example came in 2015, when legislators from across Alabama blocked Birmingham’s attempt to institute a $10.10 minimum wage. The law effectively prevented cities from setting minimum wages responsive to their local needs – even though Alabama has set no state minimum wage at all. An earlier example came in 2004, when Trussville officials sought to raise local property taxes that fund their public schools. Because of tax-related provisions in the state constitution, the move required statewide approval of a constitutional amendment. The measure won 68% support from Trussville voters, but 55% of Alabama voters rejected the amendment. People living hundreds of miles away from Trussville thus helped prevent the city from improving funding for its local schools.

Both instances demonstrate state lawmakers’ carefully preserved ability to undermine the autonomy and political authority of local communities. Those restrictions are especially egregious when a mostly white Legislature limits the authority of Black local officials.

Our antiquated tax system

The 1901 constitution perpetuates a tax structure that favors wealthy people, overtaxes people with low incomes and fails to provide adequate funding for vital services. The state property tax rate, for example, has not increased since the constitution was written. The document requires a voter referendum to raise local property taxes to support schools. Amendments in the 1970s restricted the assessment of taxable property value, which further limited funding for public schools. And for decades, the now-illegal poll tax ensured only prosperous white voters had a decisive voice in elections.

Some prosperous districts in Alabama spend more than twice as much per pupil as high-poverty districts. Because our state and average local property tax rates are among the nation’s lowest, our education system is one of the most poorly funded. When a 1933 amendment established the state income tax, it was designed to affect only the wealthiest residents. But because income brackets for these rates have changed very little in 75 years, most Alabamians now pay at the top rate. As a result, Alabama’s income tax is among the highest in the nation for families at the poverty line. Similarly, those with the highest incomes no longer pay a fair share. Writing tax policies into the constitution made these policies difficult to modernize in response to inflation and changing needs.

The sales tax is perhaps the most regressive tax. It takes nearly eight times the share of income for the state’s lowest earners as for its wealthiest families. Sales taxes rise and fall with the economy, like income taxes but unlike property taxes. As a result, our state education budget, which relies heavily on income and sales taxes, is at risk of sharp cuts when the economy slows.

Barriers to meeting Alabama’s basic needs

The constitution limits Alabama’s ability to provide needed services for struggling families. For example, a 1952 amendment prohibits use of state gas tax revenue for public transportation. As a result, inadequate transportation keeps thousands of Alabamians from meeting basic needs, such as getting to work, going to the doctor or traveling to the grocery store. Every year, Alabama frustratingly leaves millions of federal matching dollars on the table because we can’t put up the state share.

Our antiquated tax system places a straitjacket on state funding for other vital services, too, such as health care and child care. Most states earmark, or set aside for use, a little more than 20% of their tax revenues. But Alabama earmarks more than 80% of our revenues. That leaves the governor and the Legislature little flexibility to match available resources to pressing needs. Alabamians suffer when earmarking impedes an opportunity to maximize federal matching funds or increase health coverage.

Advocates for a new Alabama constitution have been divided for decades over how to best achieve their goals. Some want to hold a convention at which elected delegates would craft a new constitution all at once, subject to voter approval. Others have favored a gradual, article-by-article rewrite. Lawmakers have taken the latter approach in recent years, revising several articles but avoiding meaningful changes to tax policy or home rule.

A step forward: the recompiled state constitution

Efforts to modernize and improve the state constitution continue despite the challenges. In 2020, Alabama voters overwhelmingly approved an amendment authorizing the Legislative Services Agency to clean up and consolidate the constitution and remove explicitly racist content and illegal provisions that have since been repealed. Examples of deleted racist language include references to separate schools for Black and white children and prohibition of interracial marriages. The Legislature approved the proposed revisions in the 2022 regular session without a dissenting vote.

On Nov. 8, 2022, Alabamians will vote on whether to authorize those changes by adopting the recompiled state constitution. Arise recommends voting “Yes” on the recompilation, which will appear on the ballot as the Constitution of Alabama of 2022.

Alabama Arise urges a ‘Yes’ vote on the recompiled state constitution

Alabama Arise is committed to recognizing, teaching about and repairing the damage that state lawmakers perpetrated for generations through codifying racism and racist practices. Racist language and the harmful provisions flowing from it have no place in our state’s most important legal document. That is why we urge Alabamians to vote “Yes” on the recompiled state constitution on Nov. 8, 2022.

A graphic stating: Vote Yes on the recompiled state constitution

The recompilation will appear on the 2022 general election ballot as the Constitution of Alabama of 2022. Here is the full text that voters will see:

A revenue-neutral plan to untax groceries in Alabama

Alabama Arise supports legislation that would end the state sales tax on groceries and over-the-counter (OTC) drugs and protect school funding. By capping the state income tax deduction for federal income taxes, the plan would bring in $520 million a year, the Legislative Services Agency (LSA) estimates. That would replace the revenue from ending the sales tax on groceries and OTC drugs, which the LSA estimates at $513 million a year. The graph below shows how millions of Alabamians would benefit from untaxing groceries.

Untaxing groceries is the right path for Alabama

Alabama’s sales tax on groceries is a cruel tax on survival, particularly in times of economic insecurity. It increases hunger rates and drives struggling Alabamians deeper into poverty. Here’s why legislators need to end the state sales tax on groceries – and how they can do it:

  • Alabama is one of only three states with no tax break on groceries.
  • The state grocery tax is 4%, equal to two weeks’ worth of groceries each year.
  • Alabama can and should untax groceries quickly and responsibly. That means replacing revenue for public schools in a way that doesn’t harm struggling families.
  • Alabama can protect education funding by limiting or ending its state income tax deduction for federal income taxes (FIT). The FIT deduction is a skewed tax loophole that overwhelmingly benefits rich households.

A revenue-neutral plan to improve Alabamians’ lives

Arise supports legislation to end the state sales tax on groceries and over-the-counter medicines at an annual cost of $513 million, according to the LSA. (Local sales taxes on groceries and OTC medicines would not be affected.) To replace that revenue, the plan would cap the state FIT deduction for individuals. That change would generate $520 million a year, the LSA estimates.

The cap for Alabamians who file as single, head of household or married filing separately would be $3,500 annually. For married couples filing jointly, the FIT deduction limit would be $7,000 a year. The plan would require voter approval of a constitutional amendment.

Both sales tax revenue and individual income tax revenue go to the Education Trust Fund. By capping the FIT deduction, Arise’s plan would allow Alabama to untax groceries without cutting school funding. This plan would be a significant tax cut for nearly all Alabamians, and the largest benefit would go to people with low incomes who need it most.

Bottom line

Untaxing groceries quickly and responsibly would boost economic and food security for all Alabamians. By ending the state sales tax on groceries and over-the-counter medicines and capping the FIT loophole, lawmakers could protect funding for public schools and make life better for families across our state.

Eliminating state grocery tax would make life better for Alabama families

Alabama’s sales tax on groceries is a cruel tax on survival, particularly in times of economic insecurity. It increases hunger rates and drives struggling Alabamians deeper into poverty.

Two bills in the 2022 regular session – SB 43 by Sen. Andrew Jones, R-Centre, and HB 173 by Rep. Mike Holmes, R-Wetumpka – would end the state grocery tax while protecting school funding. The graph below shows how millions of Alabamians would benefit.

Untaxing groceries is the right path for Alabama

Alabama lawmakers have a real opportunity this year to end the state’s sales tax on groceries in a responsible way. Here’s why it needs to happen during the 2022 regular session – and how the state can do it:

  • Alabama is one of only three states with no tax break on groceries.
  • The state grocery tax is 4%, equal to two weeks’ worth of groceries each year.
  • Alabama can and should untax groceries quickly and responsibly. That means replacing revenue for public schools in a way that doesn’t harm struggling families.
  • Alabama can protect education funding by limiting or ending its state income tax deduction for federal income taxes (FIT). The FIT deduction is a skewed tax loophole that overwhelmingly benefits rich households.

A pair of companion bills would untax groceries and protect education funding by capping the FIT deduction. Jones’ SB 43 and Holmes’ HB 173 both would end the state grocery tax and cap the FIT deduction for individuals. The cap for Alabamians who file as single, head of household or married filing separately would be $4,000 annually. For married couples filing jointly, the FIT deduction limit would be $8,000 a year. The plan would require voter approval of a constitutional amendment.

Both sales tax revenue and individual income tax revenue go to the Education Trust Fund. By capping the amount of the FIT deduction, these bills would allow Alabama to untax groceries without cutting school funding. This plan would be a significant tax cut for nearly all Alabamians, and the largest benefit would go to people with low and middle incomes who need it most. The Alabama Legislature should pass this proposal this year and send it to voters for final approval.

Bottom line

Untaxing groceries quickly and responsibly would boost economic and food security for all Alabamians. By ending the state grocery tax and capping the FIT loophole, lawmakers could protect funding for public schools and make life better for families across our state.

Underregulated auto title loans are a bad deal for Alabamians

Alabama doesn’t know how many people lose their cars because of auto title loans every year. No agency collects data on title loans, which are treated as pawn transactions. But with annual percentage rates (APR) of 300% allowable under the state’s Pawn Shop Act, which governs title loans, the cost of these loans is far too high to justify.

From the lender’s perspective, a title loan is a completely safe transaction. Because title loans are backed (or secured) by ownership of the vehicle, the lender can never lose money. Secured loans, such as mortgages, usually carry lower interest rates because the lender doesn’t have the risk of losing money. But that isn’t the case with title loans.

If a title borrower defaults, the lender can simply take the car and sell it to get the money owed. Further, Alabama law allows the lender to keep all the money received at auction, even when the auction value of the vehicle is more than the amount owed.

Title loans can devastate family finances

Lack of legislative oversight means Alabamians pledging their vehicle title have the same lack of protection as someone pawning a TV or watch. But for many Alabamians, a vehicle is the most valuable asset they own.

In a state like Alabama with inadequate public transportation, a car is often the only way a person can see to their basic needs. Taking someone’s car because of a loan default means they can’t drive to work. They can’t drive to medical appointments. They can’t drive to pick up their kids from school.

Most states have realized that predatory title loans are a major drain on the finances and well-being of their residents. That’s why the majority of states have prohibited or restricted the practice. Even in states where the practice remains legal, borrowers usually have protections unavailable to Alabama borrowers.

Steps to rein in high-cost title loans in Alabama

Alabama has a menu of policy options to protect borrowers and rein in high-cost auto title lending. Those solutions include:

  • Cap the interest rates on all consumer loans in Alabama at 36% APR. This would relieve significant financial pressure on borrowers with low incomes.
  • Reduce the allowable APR on title loans to 36%. This would bring rate uniformity for small loans and help stop the worst abuses of borrowers.
  • Ensure borrowers get any amount received at auction beyond the loan amount owed. This would help limit Alabamians’ financial damage from defaults and the resulting loss of a vehicle.
  • Require title lenders to ensure borrowers’ ability to repay before making a loan. This would reduce the number of loans that result in vehicle repossession.
  • Give borrowers 60 days to cure defaults. This would better reflect the gravity of losing a car without significantly impacting lenders.
  • Create a statewide database of all title loans in Alabama, similar to the one that already exists for payday loans. This would provide additional data necessary to guide informed oversight of these businesses.

Bottom line

Auto title loans are harmful products that damage the financial health of their consumers. Alabama has failed to protect title loan borrowers or monitor title lenders in a meaningful way. A statewide loan database would be a good start toward informing legislators and the public of the system’s shortcomings. It also would build momentum for a rate cap and other major reforms needed to prevent financial abuse of Alabamians.

Payday lending harms families and communities across Alabama

Every year, underregulated payday lenders drain tens of millions of dollars from Alabama communities. These financial predators use some of that money to pay a fleet of lobbyists and fund legislative campaigns against reform. They have preserved the status quo even though nearly three in four Alabamians support abolishing predatory payday loans.

There are more payday and auto title lenders in Alabama than hospitals, high schools, movie theaters and county courthouses combined. Their business model depends on churning a profit out of desperate, financially fragile customers. And Alabama provides them with plenty. About 15% of Alabamians – nearly one in seven people in our state – live at or below the poverty line.

Payday lenders are on track to pull about $1 billion in fees out of Alabama communities over the next decade. Nearly all of their profits will flow to out-of-state companies. And these profits come out of the pockets of borrowers who already struggle to make ends meet. Until the Legislature acts, the scourge of predatory payday loans will continue to devastate thousands of family budgets and local economies.

Legalized usury

Many states have interest rate caps that prevent usury in lending generally. But in Alabama, payday loans aren’t governed by state laws that cover other loans. Instead, payday lenders are allowed to charge a $17.50 “loan origination” fee per $100 they lend. At the most common loan period of 14 days, this is an annual percentage rate (APR) of 456%.

Eighteen states and the District of Columbia have abolished predatory payday lending by setting interest rates far below Alabama’s rate. Many of those rate caps are 36% APR, which would match the allowable rate for other loans in Alabama. It also would match the rate cap that Congress set for military members and their families in 2006.

Other Southern states already have recognized the predatory nature of these businesses and stopped these abusive practices. Arkansas and Georgia both prohibit triple-digit interest rates, as the people of Alabama want the Legislature to do.

Straightforward solutions require political will

Alabama has a menu of policy options to protect borrowers and rein in high-cost payday lending. Those solutions include:

  • Cap the interest rates on all consumer loans in Alabama at 36% APR. This would broaden the protections that military borrowers already have to our entire population. This is Alabama Arise’s top legislative recommendation on this issue.
  • Allow borrowers to pay loans off in installments. This would help people reduce debt more gradually and sustainably instead of forcing them to pay a loan off all at once.
  • Cut the fee for originating a loan from the current $17.50 per $100. This change would lessen payday loans’ financial burden on borrowers.
  • Require payday lenders to ensure borrowers’ ability to repay before making a loan. This would reduce the risk that borrowers become trapped in cycles of deep debt.
  • Give borrowers 30 days to repay payday loans. This would cut the effective APR from 456% for a 14-day loan to about 220% for a 30-day loan.

Bottom line

Momentum for stronger consumer protections is building at the federal level, but a rate cap for payday loans is ultimately up to state lawmakers. Payday lending reform advocates must continue building public pressure and support to protect struggling families and strengthen communities across Alabama.

Criminal justice debt creates major barriers to economic health

It is unconstitutional to jail someone just because they owe money. But Alabama has no set process for courts to determine if a defendant can afford to pay fines and fees. And though debtors’ prisons are illegal, thousands of Alabamians are in danger of going to jail or are driven further into poverty because they can’t pay high costs attached to the criminal justice system.

Fines and fees are everywhere

Alabama relies heavily on fines and fees to fund its court system. Largely as a result, fees are attached to every phase of criminal justice proceedings in our state.

People pay bail bonds and related fees to avoid jail before trial. They pay fines and costs if convicted. They pay fees for drug testing, parole supervision and public defender representation. And they pay for diversion programs to keep convictions off their record and community corrections programs to maintain jobs and lives while serving sentences.

The financial damage continues beyond the courthouse and jail. People pay fees to reinstate driver’s licenses and higher costs for some mandatory types of insurance. They pay interest and surcharges because they can’t pay the full amount at once. And they even pay a fee for paying in installments.

Criminal justice debt adds up

A 2014 survey by TASC, Jefferson County’s community corrections program, found 90% of participants owed court debt averaging $7,885. Costs for possessing 1 ounce of marijuana in Shelby County could total $2,611, the Public Affairs Research Council of Alabama found. Probation could add $960, and driver’s license restoration would add another $300.

Legal financial obligations (LFOs) often lead to incarceration and debt. In much of Alabama, a person who falls behind on payments can be jailed. TASC’s survey found nearly one in five respondents (18%) had been jailed for failure to pay fees or fines.

Mounting debt also can prompt cynicism about a system that preys on people of color and people who live in poverty. Many of the worst abuses of criminal justice debt have occurred in places with large Black and Hispanic populations. Four out of five people charged with crimes are indigent. And 60% of people surveyed by TASC said they had to choose between paying LFOs or meeting basic needs like groceries, utilities and housing.

Fixing Alabama’s criminal justice debt problems

Lawmakers have numerous policy solutions available to help repair a court system that traps many Alabamians in debt. These options include:

  • Standardize determination of ability to pay.
  • Create an income-based sliding scale for fines, fees and other legal financial obligations.
  • Eliminate cash bail for misdemeanors.
  • Stop requiring payment of fines and fees before restoring the right to vote for Alabamians who are otherwise eligible.
  • Prohibit jailing people for unpaid debt.
  • Study and remedy racial disparities in criminal justice debt.
  • Encourage courts to use alternatives to monetary sanctions, such as community service or treatment programs.
  • End driver’s license revocations and suspensions for offenses unrelated to driving, such as a drug crime or missed court date.
  • Eliminate fees for reinstating driver’s licenses.

Bottom line

Alabamians deserve a justice system that helps people rejoin society and doesn’t squeeze every cent from people with limited resources. Funding courts through adequate general appropriations instead of fines and fees would be a major step toward a more just, inclusive Alabama for all.

Alabama’s death penalty practices remain unjust and unusually cruel

Americans increasingly oppose the death penalty. Gallup found that opposition to the death penalty more than doubled in the past 25 years. This may result from disturbingly high error rates in the system. For every 10 people executed since 1976, one innocent person on death row has been set free.

Alabama took an important step toward death penalty reform in 2017, but the state’s death penalty scheme remains broken. That year, the state finally outlawed judicial override in capital cases. That change means judges no longer can impose the death penalty when a jury recommends life without parole.

But the ban was not retroactive, and 35 people who were sentenced that way remain on death row. Fixing that failure is one of several key reforms that would bring Alabama’s capital punishment system in line with national standards and federal court rulings.

Alabama’s death penalty practices are behind the times

Alabama’s death penalty scheme has failed to keep up with reforms in the rest of the United States. Under state law, prosecutors do not have to prove a defendant was at least 18 years old when the crime occurred. State law also lacks protections against executing people with mental disabilities. U.S. Supreme Court precedent is the sole authority preventing executions of defendants with IQs below 70.

An increasing number of states are abandoning capital punishment. Most recently, Virginia became the first Southern state to do so when Gov. Ralph Northam signed an abolition bill in March 2021. In all, 26 states either have abolished the death penalty or have seen their governor impose a moratorium, according to the Death Penalty Information Center.

Racial disparities abound in our state’s capital punishment system. In Alabama, people convicted of killing a white person are more than four times more likely to get a death sentence than people convicted of killing someone who is not white, the Equal Justice Initiative found in 2011. And Alabama has more people on death row per capita than any other death penalty state.

How to reform Alabama’s capital punishment system

Ending judicial override in future cases was an important first step toward fixing Alabama’s broken death penalty system. But other recent changes have aimed to enshrine that system instead. In 2018, the Legislature authorized a backup execution method, nitrogen hypoxia, in case courts outlaw lethal injection. This new procedure would kill people through suffocation, and it has never been used on a human before.

Efforts to prop up the state’s broken death penalty system are misguided. Alabama can and should enact numerous reforms to reduce the unfairness of its death penalty practices. Those changes include:

  • Make the 2017 judicial override ban retroactive.
  • Require unanimous agreement from the jury to sentence people to death.
  • Amend state law to require prosecutors to prove a defendant was 18 or older at the time of the crime.
  • Amend state law to forbid executions of people who have serious cognitive impairments.
  • Impose a moratorium to study and end racially biased death penalty practices.
  • Provide state funding for appeals of death sentences, as all other states with capital punishment do.
  • Ultimately eliminate capital punishment.

Bottom line

Alabama should reduce and eliminate the unequal, unfair practices present in the state’s death penalty scheme – and ultimately should end capital punishment entirely. Alabamians deserve a fair, unbiased justice system, and these death penalty reforms would be steps toward a more just state.