Bentley proposes tax increase on cars, cigarettes

Alabama is running headlong into a debilitating budget shortfall, and Gov. Robert Bentley today proposed his remedy — higher taxes on cars and cigarettes.

Looking to alleviate the  $702 million deficit in the State of Alabama’s General Fund Budget, Bentley’s plan calls for new taxes and closing tax loopholes. He estimates it will generate $541 million in revenue for the state, which will be used to close funding gaps, repay debts and fund services including Medicare and Corrections.

During a press conference on Feb. 27, Bentley proposed: 

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1.  Increase cigarette taxes by 82 cents per pack.

›  Estimated annual revenue: $205 million

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2. Increase automobile sales tax to 4 percent.

›  Estimated annual revenue: $200 million

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3.  Tax residents served by public utilities. Currently, if your water or power comes from a municipality-owned system, you are exempt from paying utility license taxes.

›  Estimated annual revenue: $47 million

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4. Increase automobile rental tax to 4 percent.

›  Estimated annual revenue: $31 million

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5. Remove tax credits for insurance companies.

›  Estimated annual revenue: $25 million

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6. Combine national and international tax reporting for corporations. Doing so will require international corporations with domestic employees to pay income tax domestically.

›  Estimated annual revenue: $20 million

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7. Eliminate income tax withholding exemption certificates for individuals.

›  Estimated annual revenue: $12 million

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8. Require banks to pay sales tax. The Financial Institution Excise Tax allows banks to receive a credit for sales tax paid.

›  Estimated annual revenue: $1 million

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The estimated total of $541 million in revenue generation is composed of 75 percent potential taxes from car and cigarette sales. Bentley released that this money would be used to:

› Replace the $265 million previously used to prop up the general fund that is no longer available.

› Repay the Alabama Trust Fund $32 million

› Increase Medicare operating funds by $115 million

› Increase Corrections Department operating funds by $40 million

› Increase designated money for roads and bridges by $63 million

› Restore $187 million to the Education Trust Fund

 View Gov. Bentley’s proposed solution here.

Read his prepared remarks for the Feb. 27 press conference here.