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October 07, 2005   Email to Friend 

Jeff Helms
(334) 613-4212
October 07, 2005

Alabama finished the fiscal year with $299 million in budget surpluses thanks to a double-digit increase in tax collections during the past 12 months.

According to the state Revenue Department, tax collections rose 11 percent during the fiscal year that ended last Friday. Tax collections, after refunds, totaled $7.1 billion for fiscal year 2005, up from last year's $6.4 billion.

Personal income tax collections, which comprise the state's largest source of revenue, were up 11 percent from last year. The second-largest revenue source, sales taxes, were up 6 percent. Corporate income taxes jumped 43 percent due in large part to the economic recovery, the Revenue Department reported.

Economists said the increase in income tax collections was fueled by a drop in the unemployment rate. In August, Alabama's jobless rate was 3.8 percent, compared to a national rate of 4.9 percent.

Alabama Farmers Federation Governmental Affairs Director Freddie Patterson said the latest numbers from the Revenue Department prove that voters were right in 2003 when they rejected a proposed $1.2 billion tax hike known as Amendment 1.

"This is a shining example of how businesses and a strengthening economy grow revenue, not higher taxes," Patterson said. "Businesses create jobs, which lead to increased spending and higher tax collections. Realizing this, Alabama should concentrate on reforming its spending process rather than calling for new taxes which could slow economic growth."

Auburn University Montgomery economist Keivan Deravi told the Associated Press that Alabama is "sitting absolutely gorgeous, not even pretty in terms of job creation."

Those comments were echoed by State Finance Director Jim Main who told reporters the revenue totals "could not have been better."

Increased tax collections had a direct effect on the state's budgets, which despite fears of shortfalls during the regular session of the Alabama Legislature, ended the fiscal year in the black. The state education budget finished with an unexpected surplus of $265 million while the General Fund budget ended with a $34 million surplus.

The Revenue Department report also showed that higher gas prices haven't stopped Alabamians from traveling. In fact, gas tax collections, which are based on the gallons sold rather than price, increased from $406 million last fiscal year to $411 million in 2005. During September, when Hurricane Katrina caused prices to skyrocket, gas tax collections were up 6 percent, compared to the same month last year.

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