Last week, Gov. Bentley followed up on his talk of the need to break the General Fund Budget shortfall cycle by proposing new taxes in his 2016 budget. The Governor’s budget included $541 million in new taxes and also included un-earmarking $187 million from the Education Trust Fund for a total of over $700 million in new dollars for the General Fund.
*A complete listing of the Governor’s tax proposal can be found here: Governor Bentley Tax Increases.
The budget now falls into the lap of the Republican controlled Alabama Legislature that for the most part ran in 2014 on the platform of no new taxes. Most believe there is still ‘fat to cut’ in the budget before new taxes are imposed on the people and business of Alabama. How the budget will look at the end of the session is anyone’s guess, but the budget presented by the Governor is never the final budget.
Tax Proposals that would affect the Concrete Industry
Raise Sales Tax on Purchase of Trucks and Cars
Nearly half of the new revenue proposed by the Governor comes by way of raising the sales taxes on the purchase of cars and trucks from 2% to 4%. The two percent increase is forecast to raise $200 million in additional dollars for the General Fund. During better economic times, the ready mix industry needs to replace approximately 100 trucks a year. On a $200,000 ready mix truck, the impact is an additional $4,000 per truck or $400,000 for the industry. An even bigger problem for the industry is cities and counties often raise their sales taxes on vehicles at the same time the state makes a change. As of this writing, no bills have been introduced to raise the vehicle sales tax.
Unitary Combined Reporting for Corporate Income Taxes
House Bill 142 by Representative Mike Hill, R-Columbiana would require combined income reporting for corporations that do business in other states. The estimated increase in revenue is $20 million. Combined reporting requires that a business effectively disregard the legal existence of affiliates and report on a combined basis the operations of all related entities involved in a unitary business. In other words, the state would look at all income for a multi-state corporation in order to determine Alabama’s share of taxes to be paid, regardless of whether or not an affiliate does business in Alabama.
Other issues we are tracking
Diesel Fuel Tax Increase?
We are still looking for legislation from the road building industry that would raise additional funds for the Alabama Department of Transportation. Based on recent reports, ALDOT has the same buying power as in 1991 due to the increased cost of construction and materials. There is talk of raising additional funds by way of increasing the diesel fuel tax. One idea being discussed is $.15 per gallon on diesel fuel. An increase of this amount would result in an estimated $2 million tax on the industry. As of this writing, we have not seen a bill introduced.