Budget cuts are the topic of the day, and no wonder. The national economy is just wiggling itself out of the worst downturn in eight decades, and among the victims are the governmental budgets that depend on wealth and sales.

Seeing the headlines, it’s tempting to merge the entities involved. Federal and state governments are struggling, deficits looming, and we need to cut, cut, cut. At first glance, the same surgical approach seems applicable to both.

Eric Fleischauer Capital considerations

In some states, the same scalpel may work for federal and state governments. Very few of Alabama’s problems, however, can be solved through dissection.

The federal taxation system — with numerous lobbyist-created exceptions — is progressive. That is, people who earn more pay a greater percentage of their earnings to support the system that has allowed them to succeed. It makes sense. A billionaire, who has benefited dramatically from a tax-supported system that protects his property and the tools he needs to increase that property, should bear a heavier burden in perpetuating the system. A contrary result would have those sidelined by a capitalist system — those who can vote and carry weapons, but can’t create a business — paying more for a system that hurts them. Precisely because they can vote and can carry weapons, the federal system has recognized the disastrous potential in increasing the tax burden they carry in perpetuating a system they have reason to despise.

The state of Alabama, however, does not have a progressive tax system. Every person making more than $12,600 a year pays the same percentage of state income tax. Accumulated wealth is uniquely untouched in Alabama, which has the lowest property-tax rate in the nation. Unlike most states, we tax groceries, meaning those lousy at the capitalist game get no break even in feeding themselves. We allow our citizens to deduct federal income tax, meaning we allow the rich to escape any progressive shadows from the federal system.

Among responsible citizens, the issue of federal budget cuts is merely one of timing. Many fear that cuts now will reverse the nation’s slow economic recovery, as was the case with budget cuts shortly before the Great Depression.

In our state, however, the issue is very different. Our state’s taxation system, designed by the wealthy, protects the wealthy from financial loss. Those who are hurt by the capitalist system pay a greater share of their income to support it than do those who benefit from the system. Altruists worry about the impact of such an upside-down system on the poor. Realists worry about what happens when a majority of the state’s people, with the force of votes and arms, wake up to the game.

The answer to Alabama’s budget problem is simple: Those who benefit from the system need to pay more to support it. The federal government needs to reduce expenditures; the state needs to increase revenue through taxation reform.

Contact Eric Fleischauer at www.mile304.com or eric@decaturdaily.com