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F inally, Alabamas budgets can be sustainable and appropriately fund core functions of government employing the least regressive tax structure ever seen in Alabama. The 9 states that currently have no state income tax are among the nations most prosperous. Now, Alabama can follow that path. Additionally, this comprehensive approach is the fairest way to

bring all residents into the economy, while we continue to improve efficiency in state government.

Core Components of The Plan A Constitutional Amendment.

Repeals state income tax (many residents are currently in the 5% bracket).

Increases state sales tax from 4% to 6.5% and includes most services, but removes groceries (estimated at

$330 million) reducing the burden on low-income residents. Will not affect county/city sales tax collections. Revenue and expenses of Education Budget would be virtually unchanged.

Restrains the Growth of State Govt Cap Education Fund expenditures

(Prior Year + CPI, base line FY15)

Cap General Fund expenditures

(Prior Year + CPI, base line FY15)

Cap Medicaid expenses

(35% of General Fund)

Cap Dept. of Corrections expenses

(15% of General Fund)

Eliminates State Debt

Payment to ATF for General Fund

Rainy Day Debt ($40 million for

4 years = $160 million)

Requires Savings Of excess revenue in each fiscal year:

10% to ATF General Fund Rainy Day Fund.

25% to ATF for ETF General Fund

Rainy Day Fund.

25% to Education Capital Projects.

40% for discretionary projects (non-

recurring critical expenses as

appropriated by Legislature; if none,

monies revert to ATF general corpus.)

The Plan Invests in Public Safety

Fund prison reform, outlined in SB67, with the goal of reducing recidivism ($26 million per year for 5 years). Fund $60 million prison construction bonds ($4.5 million per year for 20 years, debt service). Many

correctional facilities are in disrepair; constructing dorms at existing DOC properties is an economic solution.

Appropriately fund Alabamas courts, prosecutors, indigent defense and state troopers.

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Eliminating State Income Tax & Modifying Sales Tax

Current FY16

Revenue Estimates The Plan FY16

Revenue Estimates

Education Budget

Income Tax $3,714,000,000 $0

Sales Tax $1,759,000,000 $5,473,000,000

Use Tax $237,000,000 $237,000,000

Other Revenue $493,393,296 $493,393,296

Subtotal ETF $6,203,393,296 $6,203,393,296

General Fund Budget

Sales Tax $89,000,000 $564,000,000

Use Tax $83,500,000 $83,500,000

Other Revenue $1,381,552,993 $1,381,552,993

Subtotal GF $1,554,052,993 $2,029,052,993

Grand Total $7,757,446,289 $8,232,446,289

DIFFERENCE $475,000,000

The need to reform state budgeting is more vital than

ever before. Clearly, the business-as-usual budgeting

approach of raiding non-general fund accounts and

using tricky accounting techniques is not a viable

long-term solution. States need innovative budgeting

strategies to address todays economic challenges

without resorting to economically damaging tax

increases.

Other Benefits of The Plan

Sales tax total is deductible from federal income tax, much like Alabama income tax has been.

This plan encourages savings by individuals, businesses and the state government.

Sales tax is the best method to have residents who dont currently pay income tax contribute to state government (i.e, individuals who receive under-the-table dollars for lawn care,

housekeeping, child care, music and entertainment, IT and professional contractors, criminal

activity, gambling, illegal immigrants, etc.)

Misc Sources: * ALEC Center for State Fiscal Reform: http://www.alec.org/initiatives/center-state-fiscal-reform. * Heritage Foundation, Stephen Moore. Job growth is 2x in states without income tax compared to those with income tax. * $2 trillion underground economy may be recoverys savior, 4/24/2013. CNBC - http://www.cnbc.com/id/100668336 * Deducting state sales tax from Federal Income Taxhttp://www.irs.gov/Individuals/Sales-Tax-Deduction-Calculator

Eliminating State Income Tax & Modifying Sales Tax