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In Legal Terms
- Volume 52, Number 6 - 2008
Why it's important to stand our ground on tax exemptions.
During these tough financial times, any loss of revenue to Alabama’s counties can be devastating.
The Association of County Commissions of Alabama adopts its Legislative Program each year at the ACCA Legislative Conference in December.
This program is a comprehensive document outlining county government’s position on almost everything. This document is viewed by ACCA staff as the membership’s directive on how we should react to legislation and in dealings with state agencies and officials. ACCA’s Legislative Program includes a “wish list” of county-related legislation and a lengthy section on policy statements advising how county government stands on various issues.
One long-standing policy statement reads as follows:
ACCA encourages the legislature to reject any additional exemptions from local sales, use, lodgings, rental, or motor fuel taxes. Further, the Association strongly supports the repeal of existing state-imposed exemptions from local taxes.
There are several other policy statements asserting firmly the position of county government that the Alabama Legislature should refrain from repealing, abating, or exempting local tax revenues.
For example, county government opposes reclassification of property for tax assessment purposes, increases in homestead exemptions, mandated abatements or abatements granted without consent of the county governing body, mandated sales tax holidays, limitations on amount or uses of local lodging taxes, elimination of county sales tax on food or other items, and exemptions from business license requirements. The list goes on.
The reasons for these strong policy positions are easy to explain.
County government does not, in general, have taxing authority. Almost all tax levies must be statutorily-created, and any changes to existing levies or new or additional taxes require further legislative act.
Additionally, counties are limited in the types of revenue enhancements they can impose, even by local act. This means that every dollar received through an existing tax levy is a precious dollar, and frequently when it is lost, it cannot be easily replaced.
Any tax exemption granted to a certain organization or class of persons or entities is a direct loss of revenue to the county – maybe not enough to bankrupt the county – but for many counties, any loss of revenue is devastating to an already overloaded budget, particularly given the current economic times.
So, every tax exemption is a big deal to county government – and every county expects Association staff to understand this and fervently fight the battle against tax reductions no matter how much money is involved or how worthy the person, entity, or cause seeking exemption.
Everyone in county government understands this and is probably asking why I am taking up an entire column to state the obvious. Because, every year Association staff spends an enormous amount of time during the Legislative Session opposing exemptions, abatements, rebates and tax repeal or reduction. And, every year we end up having to defend these policy positions on behalf of county government when questioned about opposing tax breaks for certain worthy causes or programs.
Case in point: I recently spoke against a bill to exempt rescue squad vehicles from the payment of motor fuel taxes and tag and license fees.
I explained that these groups were very important and supported by local government in a lot of ways, but that granting this and other exemptions for worthy causes with no replacement revenues would cause major financial problems for counties and other local governments. A legislator speaking in favor of the bill noted from the podium that he wondered if my membership knew what I was doing (and let me say that this legislator is a great and longtime friend to county government and to me).
I did not get the opportunity to respond to this query during the meeting, but thought to myself that I was doing what our membership expected of me – protecting county revenues and working hard to oppose tax exemptions, reductions, or repeals.
Don’t get me wrong. The rescue squads perform an invaluable service, and county government can and should support these programs in every way that they possibly can. But county government, not the Alabama Legislature, is best able to determine when and how they can support these important organizations, and they can provide better support when they are not concerned about losing county dollars through reductions in tax revenues.
So far this year, there have been about 25 bills introduced seeking an exemption from sales taxes for certain organizations or products. Each of these bills has a wonderful motive – to help out a good organization or help out a group of people in need. Each of these groups is every bit as important as the rescue squads, providing good charitable work to their communities, and each bill threatens county revenue if the exemption is granted.
Unfortunately, it is not just bills requesting exemptions from sales tax that threaten county revenues every year. There are probably 10 bills introduced this year to increase homestead and other exemptions granted on ad valorem taxes, and several bills to reduce the property tax on certain items of personal property. There are bills to exempt or reduce motor vehicle tag and registration taxes and fees for certain groups, and bills to prohibit or repeal certain business licenses. Again, the list goes on.
Any one exemption in any of these areas might not by itself cause a major reduction in tax revenues, but every exemption will hurt a little and several exemptions will hurt a lot. Once the door is open to granting exemptions, it will be difficult to close it, and it will be difficult to control it.
How do you grant one exemption and not another? How do you replace revenue lost to state and local government once you grant exemptions, rebates and reductions to every worthy cause?
The tax structure in Alabama could use major reform, and Alabama’s counties are on record as supporting that effort. However, until reform is underway, county government (and its staff at ACCA) must continue to actively and adamantly oppose piecemeal changes to state and local tax levies that threaten already-limited monies available to provide the government services that citizens expect and deserve.
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