— MONTGOMERY, Ala. (AP) — Alabama Republicans are off to a fast start on their package of proposed changes to the state tax code.
The House panel that writes tax policy approved a $1,000 tax credit for certain adoptions and a plan to make it for some small businesses to bypass estimated sales tax payments, instead allowing them to wait and make payments based on actual revenues.
Democrats on the Ways and Means Committee raised concerns that the measures will cause a drop in state revenues, though the business tax change would be just a one-time hit to the state's tax flow. Republicans countered that the changes will help taxpayers who provide a benefit to the state.
Rep. Paul Lee, R-Dothan, said his adoption tax credit would help with the considerable costs of adopting a child. As written, House Bill 48 would allow a $1,000 personal income tax credit for any tax filers who adopt a child from Alabama. The credit would apply for any adoption of a child in Alabama's foster care system or in any private adoption where the agency, the adopting parents and the child all are from Alabama.
Adoptions after Jan. 1, 2014 would be eligible.
Federal tax law allows a federal tax credit of more than $12,000 per adoption.
The state credit would be refundable, meaning a qualified taxpayer would get the full amount, even if their tax liability before the credit was less than $1,000. Legislative fiscal analysts estimate the subsidy would cost about $2.5 million in personal income tax revenues the first fiscal year. Income tax receipts go to the state's education budget.
Lee and several lawmakers argued that the state saves money on adoptions once children are removed from the foster care system. But he also conceded that the credit wouldn't necessarily encourage more adoptions, meaning a credit might not actually yield cost savings.
The better justification, he said, is simply to help parents who decide to adopt. "This process is stepping out on a limb financially for a young couple," he said.
The small-business tax bill comes from the National Federation of Independent Business. Most businesses pay ahead on sales taxes collected from customers based on their estimated receipts. Current law requires the estimated payments from any business that has an average $1,000 in monthly sales tax receipts over the previous year.
House Bill 151 from Rep. Barry Moore, R-Enterprise, would raise the threshold to $2,500. That would allow about 4,000 businesses to bypass the estimated payments, instead waiting to pay based on actual receipts.
The one-time interruption of the monthly payments would cost $4.5 million to the education budget, according to legislative fiscal analysts. But Rosemary Elebash, NFIB's lobbyist, noted that the change would not cost the state anything long-term, and she argued it's more important to give small business operations more certainty. As it is, she said, they're required to float the state money and get no interest payments back when they overpay.
"This is a cash flow issue," she said.
Rep. Patricia Todd, D-Birmingham, said she understood the appeal of both tax bills. But she also noted the immediate $7 million hit the state education budget would take. "We have a fiduciary responsibility to look at both sides of the ledger," she said.
The House Judiciary Committee is expected Wednesday afternoon to pass a measure that would create an independent body to oversee taxpayer disputes. Current law allows the state Department of Revenue to appoint administrative judges to settle disagreements. Republicans argue that allows the agency too much power over its own disputes with taxpayers.