Why does job-hungry Alabama tax businesses to open their doors?
In spite of what Alabama’s lawmakers suggest on the campaign trail about the need to promote job creation, they have not bothered to examine a tax provision that declares operating a business in Alabama to be such a privilege that it merits taxation.
Alabama has spent countless millions on economic development and industrial recruitment over the last decade. From tax incentives and education support to direct spending and infrastructure, Alabama’s political leaders have done just about everything to let business know that it is the state’s privilege to have them create jobs.
In spite of all that, we welcome new businesses to Alabama by assessing a business privilege tax (BPT) simply for the honor of doing business in Alabama.
The BPT, enacted in 1999, is “determined by the taxpayer’s taxable income apportioned and allocated to Alabama.” Unfortunately, it is not that simple. The tax amount is between $1 and $1.75 per $1,000 of net worth. For larger companies, the maximum tax is $15,000. Financial institution groups and insurers pay no more than $3 million. During the 2012-2013 tax year, the BPT brought in more than $133 million, the bulk of which went to the beleaguered General Fund.
Unfortunately for small businesses, there is a minimum tax of $100. That amount may not seem like much, but it unfairly attributes $100,000 of net worth to any new business no matter how small.
While taxing the very existence of a business seems contrary to the ends of economic development, political leaders in Alabama are looking for ways to generate revenue, not reduce it, especially in Alabama’s General Fund. Offsetting the BPT revenues with a different tax is a tough hill to climb as well.
With all the focus on larger employers in Alabama, it might be time to help out the smaller companies. If the Legislature is not able to repeal the BPT for fiscal reasons, why not abolish the minimum BPT tax? If $100 is the administrative break-even point to make the tax worthwhile for the state, simply exempt businesses with a net worth of less than $100,000 from the BPT.
If Democrats and Republicans can agree on anything in Alabama, it should be rejecting a law that penalizes the job creation we badly need in the state, especially for our smallest businesses and startups.
