The Reality of Governor Bentley’s Tax Proposal

Alabama Governor Robert Bentley wants to do away with the deduction for federal taxes on Alabamians’ state income tax returns.

Gregory J. Cook, EA, CPA, Accredited Tax Advisor

We had a young married couple in last week that are just getting started in family life. They have two automobiles, they both work and their combined income was approximately $52,000 ($26,000 each). They also have a home with a mortgage payment and a 14 month old baby.
This young couple’s state taxes were $1,800 and they had $1,650 withheld, so they owed Alabama $150. If our Governor gets his way, they would have lost the deduction for federal income taxes and Social Security and Medicare taxes totaling $5,957.

Instead of owing Alabama $150, they would owe $448.

On the other hand, we had a retired business executive who draws $240,000 per year from a Defined Benefit Retirement Plan, who pays -0- state income tax and could care less if his federal taxes are deductible, because it doesn’t matter. He will still pay -0- after Bentley’s tax increase.

Do you think Bentley’s proposal is a fair, Christian approach to solving the state’s need for more money in Montgomery?

Gregory J. Cook, EA, CPA

News and announcements from Cook & Co. Tax Advisors at 124 South Main Street in Arab, Alabama.

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