MOYERS: In the Montgomery state capitol this past September, some Alabama mayors and local politicians — most of them Democrats — threw their support behind a radical tax plan, one that would reverse 100 years of inequality in Alabama.

CHARLES HARDEN: We just wanna thank Governor Riley for the courage that he has taken in leading out in the state of Alabama to change the history of the state of Alabama with this tax package.

T.C. CODY: We, as a group, are collectively tired of always being 49th and 50th. And we applaud and support the Governor's vision to move Alabama to the forefront.

JAMES PERKINS, JR: To vote yes. To vote yes. To vote yes in support of this progressive legislation.

MOYERS: What was surprising was the architect of the plan: a conservative, self-styled Reagan Republican, Alabama's governor, Bob Riley.

GOVERNOR RILEY [MONTGOMERY 9/2/03]: It is the most comprehensive reform of state government this state has ever seen.

GOVERNOR RILEY [BIRMINGHAM [8/15/03]: We designed a program, ladies and gentlemen, that truly does address the needs of the least fortunate among us.

MOYERS: The recently elected governor wanted to reform the most unfair tax system in the nation with the biggest tax hike in Alabama's history. He would do it by raising taxes on the wealthy and cutting taxes for the poor.

GOVERNOR RILEY [BIRMINGHAM 8/15/03]: There are too many working men and women in middle- to lower-income families that are struggling every day. And we need to relieve the burden. And you do it by one way. You literally go in, and ask people who have not paid their fair share for 100 years to step up and finally pay what they should pay.

MOYERS: Inequality takes on special meaning in Alabama, where over forty percent of families earn less than $35,000 a year, and one fifth of the children live in poverty: here, the state tax system itself is weighted against the poor.

RICHARD BAILEY, AUTHOR & HISTORIAN: We've had extremely low property taxes in the state of Alabama on one hand. And secondly, we've had a regressive tax structure on the other hand. And that regressive tax structure has really penalized the poor.

MOYERS: The tax structure is regressive because the people with less money pay three times as much of their income in taxes as do those with the highest income.

ROBERT POLLIN, ECONOMIST: Most of the tax burden is a sales tax, and in Alabama, even food is taxed. People spend, you know, poor people spend 25 percent of their income on food.

MOYERS: When it comes to state income tax, the lowest-earners — two-thirds of Alabama's population — pay 11 percent of their income in taxes. In contrast, the wealthiest 1 percent pay less than 4 percent. Alabama's been called an economic plantation: for example, trees cover more than 70 percent of the state, and forestry is Alabama's leading industry. Yet timber and paper companies contribute less than 2 percent of all property tax revenues. Meanwhile, Alabama's families are taxed on earnings as low as $4,600 a year. Even by the standards of the poor Southern states, this is extreme. In Mississippi next door, you pay no income taxes until you earn $19,000.

RICHARD BAILEY: We have not changed that tax structure since 1933. Why would anyone in 2003 want to hold on to a Depression era tax structure?

MOYERS: Last May, after just five months in office, Governor Riley decided drastic changes were needed. He unveiled a tax reform plan that would ask the well-to-do to shoulder more of the state's tax burden.

GOVERNOR RILEY [MOBILE 7/15/03]: Ladies and gentlemen, this is a defining moment in this history of Alabama.

MOYERS: Riley had served in Congress and been voted the "most conservative member of Congress" for his anti-tax record. Now, as governor, he said he had no choice; the state was facing a record-breaking budget shortfall.

GOVERNOR RILEY [MOBILE 7/15/03]: When we came into office, we inherited a budget that is $675 million in the hole.

MOYERS: Riley decided against cutting vital services to fill the hole in the budget. Instead, he proposed raising Alabama's taxes to a record $1.2 billion a year, an amount he said would make up the shortfall as well as reform a state government infamous for pork barrel spending and inefficiency.

GOVERNOR RILEY: If you look at the package, there is more reform in this one vote than I think all of the reform that we've seen in Alabama over the last 40 years.

MOYERS: For Riley, improving education was key. $300 million would be used to revitalize schools in a state where funding for education ranks near the bottom of the 50 states. The state's illiteracy rate is as high as 25 percent.

JAMES CARTER, SUPERINTENDENT: If you want to have a Cadillac program, you can't operate on a horse-and-buggy budget.

MOYERS: James Carter is the Superintendent of Schools in Selma.

CARTER: We're asking teachers and principals and certainly staff to do more with less. If this tax package doesn't pass, every program will have to be cut including athletics, including band and choir, and these are extracurricular activities that we pay for now, we simply could not afford.

MOYERS: Under the governor's plan, to be phased in over five years, if you own a home worth $80,000 — the average in Alabama — your state property taxes would go up around $80 a year. Taxes on a quarter of a million-dollar home would rise around $560. In contrast, homes valued at $50,000 or less would pay no property taxes to the state. Income taxes, too, would go up, but only for individual incomes over $75,000 and family incomes over $150,000. Those with earnings under $47,000 a year — more than half of Alabama's families — would pay less.

GOVERNOR RILEY: I don't think this is a liberal or conservative policy. I think it's just a matter of basic fairness… To charge someone an income tax that's making less than $5000 a year I just think is disproportionate.

MOYERS: In a state where the Ten Commandments have been dragged into the Supreme Court, there were moderate Christians who agreed with Riley, saying the inequality of the state's existing tax system was downright "un-Christian."

SUSAN PACE HAMILL: Those of us blessed with more need to contribute a little more and need to be compassionate about it.

MOYERS: Susan Pace Hamill, a law professor and Methodist, argued in a widely-quoted essay that a system that, quote: "economically oppresses low-income Alabamians" while benefitting the wealthy was "immoral." Governor Riley, a Southern Baptist, picked up on it.

GOVERNOR RILEY: In my New Testament, it says that there's three things we should do, "Love God, love each other, and take care of the least among us." I think this does that.

MOYERS: But Riley's plan stunned his own Republican Party and his conservative base, including the Christian Coalition of Alabama.

JOHN GILES: It's one of the tenets of our organization is to ease the tax burden on all families. Therefore you find us very much applauding and embracing the concept of giving tax relief to the poor. But we feel like that's a separate issue.

MOYERS: The Christian Coalition's John Giles said they didn't need a billion-dollar tax hike but rather more accountability in the way existing money is spent.

GILES: The money has been there for services. I don't know anybody that's gone lacking. I don't know of any unemployed person that has not gotten a check. I don't know of anybody that didn't get government services that were of a low-income family. Nobody has ever suffered in this state.

MOYERS: State law required that the voters make the final decision. Riley's supporters urged a vote "yes" for the plan. Opponents urged a "no" vote in the upcoming referendum.

STAN PATE, COMMERCIAL REAL ESTATE DEVELOPER: This is not a spiritual issue. This is a public policy issue about how to finance this state, how to pay the bills.

MOYERS: Opponents like commercial real estate developer Stan Pate fought the proposed tax hikes on large landholders. Some timber companies and cotton plantations claimed that under Riley's plan they would face property tax increases as high as 400 percent.

PATE: You have to remember that it was the rich farmland and timberlands that brought the settlers to this part of the country and they're still number one generator of revenue in this state. So, they need to be protected.

MOYERS: Governor Riley insisted the companies would still be getting a bargain. After all, now they were paying the lowest property taxes in the region, just $1.30 an acre, compared to $2.50 an acre in Mississippi, and $4.50 an acre in Georgia.

GOVERNOR RILEY: Even after the full phase in over the next five years, Alabama would still be charging less property tax than just about any other southeastern state.

MOYERS: The powerful interests opposed to Riley's plan launched a media blitz.

OPPOSITION TV ADS: …State property taxes can jump 397 percent… We hand over a billion dollars in new taxes, they spend it on what they want..

MOYERS: Funding the campaign were corporations like Alfa Mutual Insurance and South-Trust Banking and large landholders like the Alabama forestry producers, the Weyerhaeuser Paper Company, and the Alabama Farmers Federation...

OPPOSITION TV AD: …Time to service your car? Montgomery will double their take...

RICHARD BAILEY: These special interest groups have used all sorts of demagoguery to make it appear as if the poor, the working poor in the state of Alabama, will bear an unfair burden of taxes if this proposal is passed.

SHELIA SMOOT, COMMISSIONER, JEFFERSON COUNTY: We got a high illiteracy rate in this state, very high. The big guys who are trying to defeat this plan are banking on that. However, they know that most families have one or two TV sets in the household so, they bank on that medium to try to get their point across because they know these folks can't read.

OPPOSITION TV AD: …97 words. What will it mean to you? A $1.2 billion tax increase. And since the ballot wording for the amendment is confusing…

SMOOT: So, what do you do? You keep a population here, you keep them, well, you keep them stupid about the issues. Why? Because you can protect your own piece of the pie, you know? Well now, it's just time to share that piece of the pie.

MOYERS: Riley's team fired back with some ads of their own.

RILEY TV AD: They are laughing at us. The people who want you to vote no are laughing because they've tricked us into believing that family taxes will go up if we vote yes... most families' taxes will go down and schools will get better… They are lying to make sure that we keep paying for their huge tax breaks. September 9th, vote yes so we get the last laugh.

MOYERS: On September 9th, 54 percent of Alabama's voters showed up for the referendum. A two-thirds majority rejected the governor's tax reform package. The opposition was elated.

JOHN GILES, CHRISTIAN COALITION: When the voters are educated on an issue, and they're given all the facts, they make right decisions. And so we congratulate the citizens across this state for educating themselves on this very complicated issue.

MOYERS: Years of bitter experience had left many voters deeply suspicious of how the extra tax money would be used by a notoriously corrupt state legislature and many voters who get most of their information from television remained confused as to how Riley's complicated tax plan would affect them. Exit polls showed that Riley's plan actually had less support among poor and working class blacks and whites — those whom the plan would have helped the most — than among Alabama's wealthy. Now some very tough cuts have to be made to achieve a balanced state budget.

RICHARD BAILEY: We will have to dismiss some teachers. We will have to release some inmates from our prisons. We will have to release about 1/3 of our state troopers from monitoring our highways. We will have to curtail some healthcare programs we've provided for the elderly.

MOYERS: The gap between rich and poor in Alabama, rather than being reversed, is destined now to become wider than ever.

SMOOT: I feel a sense of hopelessness more so than I've ever seen in this state. They just don't feel like there's any hope. I don't care if you're at the top of the food chain or the bottom. This state oughta be working for everybody.