House Dems propose closing tax loopholes

Published 3:39 pm Wednesday, April 6, 2011

Alabama House Democrats on Tuesday proposed a series of bills that they said would help close corporate tax loopholes and raise needed money for education.

“These are loopholes that for the most part are simply not allowed in other states and not only hurt schoolchildren and education employees, but they also often put local small businesses at a competitive disadvantage,” said House Minority Leader Craig Ford, D-Gadsden.

Gov. Robert Bentley has already proposed closing one tax loophole that he said would make about $25 million to $30 million for the state, by changing a regulation that allows multi-state companies to shelter income they have earned in Alabama in other states.

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Democrats said their 12 bills, if enacted, would bring more than $200 million to the Education Trust Fund next year.

On Wednesday, a House committee approved an education budget that increases class sizes and cuts state funding for more than 1,000 teachers.

“It is through our broken corporate tax system that such a disparity can take place,” Ford said. “These big out-of state companies use their armies of tax lawyers to exploit our state. We invite our Republicans colleagues to join us in righting this wrong.”

Alabama Department of Revenue figures show individual income tax receipts are up from last year while corporate state income tax revenue is down, though profits and income are up in Alabama and nationwide, Democrats said.

“In 2008, 1,700 companies that do business in Alabama reported $413 billion in income to the IRS. Yet, they paid absolutely no Alabama state income tax,” said Rep. Richard Lindsey, D-Centre. “There were 16 companies doing business in Alabama that reported over $1 billion in federal income each. Yet, they paid zero Alabama taxes.”

In 2001, House Democrats worked on the issue of Combined Reporting reforms when it came to light that Toys-R-Us was using its own Geoffrey the Giraffe as a huge tax deduction. The Add-Back effort was necessary to stop dozens of companies from taking inappropriate deductions to use their own names and logos. In 2008, House Democrats fought to close the Real Estate Investment Trust shell game where major companies paid themselves rent for huge deductions on Alabama state income tax.

The new legislation is designed to close similar loopholes and practices that the average Alabamian can clearly see are unfair.

“Alabama families and small businesses are paying their fair share. It’s time to close these loopholes, and level the playing field for Alabama businesses and taxpayers. It will also raise revenue at a time when it is desperately needed. It is fair for business, it is fair for school children, and it is the right thing to do,” said Rep. Merika Coleman, D-Midfield.