Senators say phase out grocery tax
MONTGOMERY — Leaders of the state Senate’s Republican Caucus said Thursday their priority for the next legislative session will be to phase out the state sales tax on groceries, without raising other taxes as some Democrats have tried in the past.
Leaders of the minority caucus said a plan nearly passed by Senate Democrats last spring would have caused many Alabamians to pay more in new income taxes than they would have saved on grocery taxes.
“It’s a huge hit,” said Sen. Larry Dixon, R-Montgomery, speaking at a news conference.
Dixon joined Sen. Del Marsh of Anniston and Sen. Arthur Orr of Decatur to outline the GOP’s agenda for the legislative session starting Feb. 3.
In addition to phasing out the tax on groceries, the caucus is pushing for a ban on transferring money between political action committees and the end to annual reappraisals of homes for property taxes.
The PAC and property tax bills were also on the priority list that the Senate Democratic Caucus set in their “Covenant for the Future” in 2006, but neither has ever passed.
The leader of the Senate’s Democratic majority, Zeb Little of Cullman, said Thursday his caucus has not set its priorities for the upcoming session, but it will likely try to pass the grocery tax repeal that narrowly failed in May.
“It’s criminal we tax baby food and not food for chickens. We shouldn’t tax either one,” he said in a phone interview.
In Alabama, sales tax collections from groceries and other products finance public education. The Alabama Education Association, one of the state’s most influential lobbying groups, always fights any bill that reduces tax collections unless it replaces the lost revenue with a new tax.
Last year, Rep. John Knight, D-Montgomery, worked with Alabama Arise, a lobbying group for the poor, to propose a bill to eliminate the state’s 4 percent sales tax on groceries. That would be a savings of $320 million.
The plan also would have raised the threshold where workers start paying the state income tax and made other changes that would push the savings above $500 million.
To replace the lost revenue and satisfy AEA, their plan would repeal the state income tax deduction that Alabamians get for federal income taxes paid. That would have caused higher-income Alabamians to pay more in new taxes than they would save in grocery taxes.
Knight’s plan narrowly passed in the House, but Senate Democrats came one vote short of getting it passed in May.
The Republicans said that come February, they will push a bill by Sen. Scott Beason, R-Gardendale, that would phase out the sales tax on groceries by 1 percent a year. The phase out would occur only in years when the state’s tax collections for education are growing at least 3 percent. The state exceeded that growth each year between 2004 and 2007, but not in 2008. It’s also unlikely to happen in 2009 with the recession.
The Republicans’ plan does not include any new income taxes. But Republicans said Knight’s plan would result in a tax increase for a single taxpayer making more than $42,000 annually.
“It is truly a spread the wealth around piece of legislation,” Orr said.
Kimble Forrister, executive director of Alabama Arise, said few taxpayers would pay more under his group’s plan. For instance, nearly 82 percent of single taxpayers in Alabama make less than $40,000 annually, he said.
He said the goal is to help lower-income Alabamians without hurting public education.
“Our plan does it all in one year without taking away from education,” he said.