House committee approves cigarette tax, other revenue bills

Local News

MONTGOMERY, Ala. (AP) – An Alabama budget committee on Wednesday approved a 25-cent-per-pack cigarette tax increase and other revenue bills as lawmakers try to close a budget gap before the fiscal year begins in three weeks.

The House Ways and Means Committee action was the first sign of budding agreement among lawmakers after months of stalemate over a projected $200 million general fund shortfall. However, the proposals still face difficult floor and Senate votes ahead.

“Individual members, whether they voted no or not, are beginning to realize that we’ve got a critical situation that has to be addressed here by October the first. Whether or not we get this package through the House tomorrow or not, I’m not sure,” said House Ways and Means Committee Chairman Steve Clouse, R-Ozark.

The proposed cigarette tax, which would raise a projected $66 million annually, is the largest component of the House revenue proposals. The committee also voted for bills to raise the car rental tax from 1.5 to 2 percent; increase the car title fee from $15 to $28; place a provider tax on pharmacists and nursing homes to generate more money for the state Medicaid program; and adjust the business privilege tax so smaller businesses pay less and larger ones pay more.

The funds would generate about $120 million. The committee later on Wednesday approved a budget, based on those tax increases, that would level-fund prisons, Medicaid, mental health service, courts and child welfare services while giving cuts of up to 8 percent to other agencies.

The House plan is also banking on some help from education funds. The House education budget committee approved a proposal to take $50 million from the state’s rolling reserve fund for education and give it to the general fund. The money would have to be repaid by 2018.

Gov. Robert Bentley who is seeking $260 million in tax increases called the committee action “good progress” but said it is not enough to solve the state’s budget problem.

“It’s a step in the right direction. I want to commend the House for what they’ve done. We’re probably about $85 million short,” Bentley said. “If this gap is not closed, then they will be closing down some facilities in the state.”

Democrats on the general fund budget committee largely voted against the tax increases.

Rep. John Knight, D-Montgomery, said the state should be looking at comprehensive tax reform and change policies that he said favor the wealthy while taxing the poor. Knight said a family of four making $12,600 are subjected to the Alabama income tax, while “the large multimillion-dollar corporations get all the exemptions and pay zero.”

“I’m for raising taxes, but I want it to be in a fair effort to do so,” said Knight, who chaired the budget committee for 12 years.

The House of Representatives will vote on the proposals Thursday. If approved, they will move to the Alabama Senate, which has been more resistant to raising taxes. Clouse said he did not want to predict what will happen.

“It’s just hard to say. This whole process has been like herding kittens. Every time you think you’ve got them all in the basket, one jumps out,” Clouse said.

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