New Year Tax Cut for Alabama Poor

About 60 percent of Alabama residents greeted the new-year with a tax gift from the Alabama legislature. The state past a tax cut that fundamentally benefits the working poor. The provision allows Alabama families making less than $12,500 to be free from paying state income taxes.

Significance attaches to the fact that Governor Riley has promised to ask the legislature to elevate the threshold for paying state income tax again from $12,500 to $15,000 in 2007. This however, would make Alabama tax cut for the working poor about half the threshold ($19,600) of Mississippi.

"This (2006) tax cut was a huge step in the right direction, but was too targeted and did not provide the necessary relief to all of Alabama's working class", uttered Governor Riley. He said that the upcoming 2007 plan will cover 90 percent of Alabama taxpayers, including most families with gross adjusted income of $100,000 per year.

For most taxpayers the dependent exemption will increase from $300 to $1000 and the standard deduction for couples will increase two folds to $7,500. For those taxpayers with adjusted gross income (AGI) of $30,000 or more the standard deduction will remain at $4,000. Conversely, deductions would fluctuate between $4,000 and $7,500 for taxpayers whose income range between $20,000 and $30,000.

Delightedly, the deduction for child will also increase from $300 to $1,000 for families with adjusted gross income less than $20,000 and $500 deduction for families with adjusted gross income less than $100,000; in effect, adding a little more money in the pockets of Alabama parents.

The money (about $60 million annually) to sustain this tax provision will come from Alabama Education Trust Fund; the tax provision will also eliminate the filing of an estimated 119,000 state tax returns and, in turn, reduces the cost associated with processing state income taxes.

"We called it a great first step... we're part of the way there. It was a compromise that took a modest amount of money away from the education budget, but it targeted tax relief to people that needed it the most", echoed Kimble Forrister, state coordinator of Alabama Rise, an advocacy group for the poor.

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