State Rep. Mike Holmes (R-Wetumpka) said the recently completed regular session of the Alabama Legislature ranks as one of the seminal efforts in state history to pass meaningful laws concerning abortion, a lottery and the gas tax, and he has another foundation-altering proposal for 2020.
Holmes said he intends to introduce a tax-reform package next year to eliminate personal and corporate income taxes and bring in revenue with enhanced sales taxes.
“It will be a fair tax,” Holmes said. “It will result in a much smaller tax increase. The average tax would be 8.1%, local and state combined. But services would also be taxed. So if you have an auto mechanic who taxes the parts, he’s also going to charge 8.1% tax on his services.”
Holmes said he got estimates from people in commerce who said the state could capture $2.7 billion to $3.2 billion annually in revenue from people who don’t pay income taxes.
“We’ve got a huge underground economy where people are paying no income tax whatsoever,” he said. “I got an estimate of $2.7 billion to $3.2 billion we’re missing. These are illegal immigrants and others who are off the books. It’s anywhere there’s a low requirement for skill.”
Holmes said under his proposal a quarterly prebate could be given to families regardless of income in an amount equal to the estimated total tax paid up to the existing poverty level. It’s designed to eliminate taxes on household necessities.
Holmes conceded his proposal may encounter difficulty in the legislature — “It’s complex and it will be a challenge to get it passed,” he said — but he has hope given what happened in this year’s legislative session.
“It was the biggest, most complicated session in the five years I’ve been here,” he said. “(Sen.) Jabo Waggoner (R-Vestavia Hills), who has been in 40 years, said it was the most complex session he’d ever seen. A lot of important stuff went through in a hurry.”
Although he opposed it, Holmes said the gas tax increase to raise money for infrastructure ranks as the most important legislation passed in 2019.
“(Gov. Kay Ivey) knew she had political capital to burn and it got fast-tracked,” he said. “She was bound and determined to get it through in one week.”
Holmes said a poll he had conducted by a professional consultant showed 63% of residents in his district opposed the gas tax increase of 10 cents a gallon over the next three years.
The state’s abortion ban is supported by a vast majority of Alabamians but Holmes knows its purpose is to draw enough lawsuits challenging it to force the U.S. Supreme Court to reconsider the landmark Roe v. Wade ruling.
“My district was overwhelmingly for it and polling shows the same thing statewide,” he said. “We got advice from constitutional attorneys to hit the right buttons and word it in such a way so it had to be a clean bill. It’s hard to explain to four million people (in Alabama) why we needed to leave it clean instead of adding amendments allowing exceptions for rape and incest. But the lawsuits are already beginning and there are ways to hold up implementation of the bill. So if it’s upheld then we can probably come back in the future and fine-tune it with the amendments for rape and incest. We’re looking for common sense flexibility.”
Holmes said he regrets the legislature decided to consider a lottery proposal by Sen. Greg Albritton (R-Atmore) instead of one by Sen. Jim McClendon (R-Springville) that would have established a gambling commission and also allowed electronic gaming at state dog tracks. Albritton’s bill calling for a paper lottery was criticized by some as a way of protecting the Poarch Creek Indians’ casino operations. Also, McClendon wanted the proceeds to be split between the General Fund and the Education Trust Fund while money from Albritton’s version of the lottery would have gone exclusively to the General Fund.
An Alabama lottery will persist until it is approved, Holmes said.
“I think it will come back forever until something gets done,” he said.
Holmes questioned the $167 million annual net estimate the state would make from a lottery.
“People think you can do miracle work with lottery proceeds,” he said. “I saw where it was projected to get $167 million net but everybody seemed confused by that. I’m not sure it was ever clear what we would get out of it. I’ve seen (data) that showed it costs 60 to 65% to pay off winners and 30% to administer it. That doesn’t leave much. You’d need gross revenue in the $600 million range to net $167 million and I doubt that. I was a no vote because there were a lot of questions that never got answered.”
Holmes said McClendon’s bill was the best solution but its complexity and the fact it would allow electronic gaming at dog tracks doomed it.
“The bill that got all the attention coming in was McClendon’s bill,” Holmes said. “His bill was the best bill by far and I wish I could answer why it didn’t go anywhere. I think we have a consensus that everybody knows we should let the people vote on it. But maybe McClendon’s bill was too complicated. It would have allowed private enterprise (the dog tracks) in Macon, Greene, Jefferson and Lowndes counties because of county referendums. We can’t make things a monopoly for a minority such as the Poarch Creek Indians.
“Albritton’s bill was much simpler but too open ended and that made it a problematic bill. There was no way to administer it except to come back after the fact.”
Holmes said he is pleased with the budgets the legislature passed for the General Fund ($2.1 billion) and Education Trust Fund ($7.1 billion), which includes pay raises for teachers and state employees.
“That’s our main job,” Holmes said. “We passed the biggest budget in state history for education. Teachers and staff and administrators got raises. As usual the General Fund was tighter. The Medicaid folks got a rebate on pharmaceutical drugs. I think it’s a livable budget, a fiscally solid budget.”
Holmes said progress was made on elementary-level reading by allowing educators to retain third-graders if they aren’t reading at grade level and also supports a commission selecting state school board members and the state superintendent instead of a general election.
“I would normally be against taking the citizens’ right away to vote for a statewide position but Alabama has been going backward for 50 years and it’s time to try something else,” Holmes said.
Holmes expects Ivey to call a special session in the fall to address the state’s prison crisis. The Department of Justice is threatening to sue the state if it doesn’t correct rampant violence and conditions it called unconstitutional. Ivey wants to build new prisons but Holmes said facilities are just part of the problem.
“I think we’ve got serious problems and all the attention has been on building new buildings,” he said. “I don’t agree with that. (Julia) Tutwiler (Prison for Women) got cleaned up without building a new building. We’re seeing stabbings, murders, rapes, sexual harassment and extortion of parents and grandparents outside the prison being told, ‘If you don’t pay us, Jimmy won’t make it. We’ll beat him to death.’
“I know of one example where a man had receipts in a cardboard box that totaled $65,000 in one year (in extortion demands). You’ve got to have something wrong in your system for that to go on and we’ve got to fix it. We have federal encroachment now and we’ve got to satisfy them first. But new buildings won’t solve the problems still in there.”