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Associated Press - "Ala. Democrats Say Don't Tax Rebate"

News Article

Location: Montgomery, AL

Leaders of the Senate Democratic Caucus endorsed legislation Monday that would keep state income taxes from being levied on the federal tax rebates that Alabamians are anticipating in May.

Caucus leaders also announced their support for legislation that would create a tax deduction for families that participate in Alabama's two college savings plans.

The economic stimulus package approved by Congress includes rebates of $600 to $1,200 to most taxpayers, more for those with children, and $300 checks to disabled veterans, the elderly and other low-income people.

'We want to make certain every dime of that money goes into the pockets of our Alabama families,' said Sen. Parker Griffith, D-Huntsville, who is sponsoring the tax exemption legislation.

The state's income tax rate is 5 percent for individuals, which means Griffith's legislation would be a $60 savings on a $1,200 rebate.

Senate Majority Leader Zeb Little, D-Cullman, and Deputy Majority Leader Quinton Ross, D-Montgomery, joined Griffith at a news conference on the Statehouse steps to promote the legislation.

Little is sponsoring a bill that would provide families with a state income tax deduction of up to $5,000 per year for money they invest in Alabama's Prepaid Affordable College Tuition plan, commonly called PACT, and in the Alabama College Education Savings Program, which is usually called the 529 plan.

The earnings by the two programs are already tax exempt when students withdraw the money to attend college. Little's legislation would keep that tax break, while adding another at the front end.

'It is time to reward our families and our students for investing in themselves, investing in their futures and investing in Alabama,' Little said.

In 2006, the board that oversees Alabama's two college savings plans called for tax breaks for contributions to encourage greater participation.

Gov. Bob Riley's communications director, Jeff Emerson, said the Democrats' desire to help families save for college is a worthy goal. 'But the Democrats commitment to it is questionable since the bill has been introduced before and the Democrat-controlled Legislature has never passed it,' he said.

Emerson said the Democrats' plan to eliminate state taxes on the federal rebates 'is a good start,' but the Legislature should go beyond a one-time tax relief and pass the governor's bill to permanently raise the threshold where working families start paying the state income tax.

'Governor Riley wants middle-class families to receive tax relief every year, not just once,' Emerson said.

With the 2008 legislative session beginning its second week, both Democratic tax breaks are pending in the Senate Finance and Taxation-Education Committee and have not yet been scheduled for consideration. Both measures affect income taxes, which support public education.

Committee Chairman Hank Sanders, D-Selma, said he supports waiving the state income tax on the federal rebates and sees no problems with the legislation passing.

'Anything we get from the stimulus package is something we wouldn't have had anyway,' he said in a phone interview.

Sanders said he supports the concept of the tax deduction for college savings and will vote for the bill, provided it doesn't have a significant impact on the state education budget during the economic slowdown.

Caucus members had not computed the anticipated impact of either proposed tax break.

During the news conference, caucus leaders also called for legislation restricting state contracts that aren't bid and pushed a resolution encouraging Gov. Bob Riley to end annual property tax reappraisals.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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