It does seem counterproductive to the economic stimulus package President Bush is expected to sign into law today if back home in Alabama, the state taxes the federal rebate.The aim of the economic stimulus is to spark an economy teetering on the edge of recession. It puts hundreds of dollars back in the pockets of middle and low income citizens as early as May only to have it taxed by the state as income in early 2009, when most are preparing their 2008 tax forms.
For instance, a working couple who receives a $1,200 tax rebate from the federal government would see $60 of it disappear into state coffers.
State Democrats say they don’t want to tax it. They want to exempt it. And we think they’re right.
So does the governor. But he wants them to go a step further and permanently raise the threshold where working families begin paying state income tax, which is a bill being pushed by the governor. That would help working poor keep more of their income rather than taxing it earlier than most states.
The state did raise the threshold from $4,600 to $12,600 in 2007, but further progress must be made.
It appears both sides have similar wants for Alabama that will benefit its rank and file citizens, and we encourage lawmakers to carefully consider both measures.
Taxpayers in Alabama need relief in the income tax area, and that’s where elected leaders ought to be looking to provide it.
