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June 13, 2003   Email to Friend 

Legislature passes Riley tax increase package

The Alabama Legislature ended its special session June 7 after giving final approval to Gov. Bob Riley’s $1.3 billion tax increase, including $470 million more each year in property taxes. The measure now will go to voters in a statewide referendum as early as Sept. 9.

The key vote of the day was the House voting to agree with the Conference Committee recommendations on current use by a vote of 58-30, radically changing current use valuation of farm property. It places a cap of 2,000 acres that can qualify for current use and increases the value of the best cropland from $532 per acre to $650 per acre. It increases the value of timberland from $585 to $714. Current use valuation for acreages above 2,000 will be phased out over a four-year period. Any land not qualifying for current use will be assessed at fair market value.

The governor’s original bill valued cropland at $824. The Legislature changed it to $750 but hard work by friends of farmers reduced that to$650 before final passage of the bill, a 22 percent increase in value for cropland and forestland.

The final bill includes a farmstead exemption of up to 200 acres for a family-owned farm as long as the family lives on the farm, or an exemption for up to $150,000 annually of the assessed value for land improvements such as farm buildings, fences, wells and facilities. The acreage may be non-contiguous.

Summary of property tax bill approved by the Alabama Legislature:

• Raises $391 million annually for state and $71 million for cities and counties when fully implemented in four years.

• Assesses all property at 100 percent of market value at the state level instead of residential property at 10 percent of its value, commercial property at 20 percent and utility property at 30 percent. Lowers the state property tax rate from 6.5 mills to 3.5 mills.

• For county and city tax purposes, residential and farm property would still be assessed at 10 percent. Commercial property would increase from 20 to 22 percent, while utility property will be decreased from 30 to 22 percent.

• Raises the current use value on farm and timber property by 22 percent, with prime farm property going from $532 to $650 per acre and prime timber property from $585 to $714 per acre.

• Limits current use valuation to 2,000 acres by one farm or timber owner. Acreage above that would be taxed at its fair market value. There is no limit now on the number of acres in current use valuation.

• Increases homestead exemption from $40,000 to $50,000.

• Creates 200-acre farmstead exemption.


Senate fails to pass Family Farm Act

Opposition from radical environmentalists, trial lawyers and liberal newspapers helped defeat the Alabama Family Farm Preservation Act for the third year in a row, according to Freddie Patterson, director of the Federation’s Department of Governmental Affairs.

Despite overwhelming approval in the House of Representatives, HB420 (Family Farm Preservation Act) failed to move in the Senate. When the bill cleared the House by a vote of 82 to 7, it went to the Senate where Senate Pro Tem Lowell Barron, D-Fyffe, objected to its assignment to the Senate Agriculture, Forestry and Natural Resources committee.

The bill was sent to the Senate Rules Committee which is chaired by Sen. Jim Preuitt, D-Talladega and no action was ever taken by that committee. The bill died in the same manner as last year.

The Texas Supreme Court recently issued a ruling that upheld that state’s right-to-farm law which mirrors HB 420.

“The Texas ruling indicates that this law is sound and is right for farmers in our state as well,” Patterson said. “We will bring the proposal back again next year.”


Summary of other tax bills

Individual income tax: Eliminates the state individual income tax deductions for payment of federal income taxes, Social Security, and Medicare taxes; raises the income tax rate from 5 percent to 6 percent for individuals with taxable income of $70,000 annually and joint filers with taxable incomes of $150,000 annually or more; and raises the annual income level at which people start paying taxes from $4,600 for a family of four to $20,000. Annual Revenue Estimate: $414 million.

Labor and Services: Implements a new state sales tax of 4 percent on labor for repair and installation services coupled with the local sales tax rate. Revenue Estimate: $40 million annually for state portion; local tax estimate unknown.

Corporate income tax: Eliminates the deduction for federal income taxes paid. Reduces corporate income tax rate from 6.5 percent to 6.0 percent. Annual Revenue Estimate: $60 million.

Banks: Eliminates sales tax deduction for banks, lowers the maximum state privilege tax a bank could pay from $4 million to $15,000 a year. Annual Revenue Estimate: $22 million.

Cigarettes: Raises the state cigarette tax from 16.5 cents to 31 cents per pack. Annual Revenue Estimate: $50 million.

Deeds and mortgages: Doubles state filing fees on deeds and mortgages. The deed tax is roughly 1 mill; tax on mortgage is roughly 1.5 mills. Revenue Estimate: $50 million annually.

Vehicle sales and leases: Raises the state sales and lease tax on cars and other motor vehicles from 2 percent to 2.5 percent. Raises the state tax on vehicle leases from 1.5 percent to 3 percent. Revenue Estimate: $113 million annually.

Insurance Companies: Raises taxes on insurance companies by reducing credits for business privilege taxes paid and investments for Alabama property. Revenue Estimate: $5 million.

Utilities: Reduces regulated utilities property tax assessment to year 2001 levels. Increases municipally-owned utilities gross receipts tax by 3.9 percent. Utility rate increases for citizens of these municipalities will be at least 4 percent.


Riley’s accountability measures focus on education system

Below is a list of accountability measures backed by Gov. Bob Riley and passed by the Legislature during the special session. These measures will be included on the ballot for voters in September. where voters will cast a single vote to accept or reject the package.

• Create a plan to pay tuition at state two-year colleges and universities for qualified high school graduates.

• Extend the public school year from 175 days to 180 days.

• Require testing and instruction in finance for superintendents.

• Pay a one-time bonus to teachers to work in schools that have a hard time attracting teachers or to teach subjects with teacher shortages.

• Require contracts and ban tenure for newly hired school supervisors.

• Make fired teachers appeal to mediators rather than circuit court judges.

• Make fired school support workers appeal to mediators rather than circuit court judges.

• Make employees of state agencies and public schools gradually start paying more for health insurance, until a single worker pays 12.5 percent of the cost and an employee with family coverage pays 22.5 percent.

• Ban pass-through pork, a way lawmakers used to stash money in state agencies' budgets knowing they will later direct where it's spent.


Legislation fails due to stalemate in Senate

The Alabama Senate ended 2 1/2 months of stalling tactics Tuesday with an agreement that gives Republican and conservative Democrats more seats on key committees. The Senate had been split 19-16 through much of the spring, with the 16 senators using stalling tactics to keep bills from being considered. Their goal was to get 46 percent of the seats on Senate committees, which would equal their representation.

An agreement reached Tuesday gives them more seats, but slightly less than they sought on the most important committees. For instance, the Senate Rules Committee, which recommends the Senate's work agenda each day, goes from a 9-3 split to 8-6.

The Senate's split this spring stemmed from the election of Sen. Lowell Barron, D-Fyffe, as president pro tem in January. Nineteen Democratic senators supported him. Ten Republican senators and six Democratic senators opposed Barron.

Barron then headed a Senate panel that assigned senators to committees. Barron's allies ended up dominating all major Senate committees. That prompted stalling tactics by the minority, except during the three-week-long special session that ended Saturday.

There were several bills regarding taxation, regulation of the insurance industry and changes in election laws that did not pass because they either failed in committee or were not considered by the assigned committee.

Bills that did not pass during the session included:

• HB 81 and SB 300 – Ethanol Grants
• SB 503 – Honey bee to be named the state insect
• HB 609 – Country of Origin Labeling for farm-raised catfish and wild fish.
• SB 354 and HB 580 – would have set minimum ad valorem tax rates at 30 mills or the equivalent in every county that currently doesn’t meet that level of funding for education.
• HB 623 – Tree Stand Safety
• SB 343 – Judicial Inquiry Commission subpoena powers
• HB 186, SB 132 –Scrap Tire Disposal Fee Bill


Agriculture and Industries Board members confirmed

Gov. Bob Riley’s appointments to the Alabama Department of Agriculture and Industries Board were confirmed by the Senate on Tuesday. The board members are Randy Owen, Kenneth McMillan, Robert Pittman, Lester Killabrew, Dorman Grace and Dickie Odom, Jr.

Jim Kelley was the only member to be confirmed by the Senate earlier in the session. These appointments are especially important for the Federation’s Sheep and Goat Committee because the ag and industries board will meet and adopt the rules that will allow producers to conduct a check-off referendum.


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