“This would be a big help to people on a limited income,” Sen. Gerald Dial, R-Lineville, the bill’s sponsor. “We’re going from a tax on an item that’s necessary to a tax on items that may not be necessary.”
Alabama and Mississippi are the only two states that still tax sales of food at the same rate as other items. Most other states offer tax exemptions, usually on the grounds that a tax on groceries presents an unfair burden on low-income people, who spend a larger fraction on their income on food.
Alabama’s sales tax adds 4 percent to everyone’s grocery bill. City and county sales taxes add significantly to that bill. In Anniston, as in many cities, the total sales tax is 10 cents on the dollar.
Several legislators, including Dial, have proposed eliminating the sales tax in the past. Those efforts have typically foundered because of legislators’ objections to losing the revenue the tax brings in. Dial said the tax on food brings in about $390 million per year. Because sales taxes are earmarked for the Education Trust Fund, eliminating the tax on food would create a budget hole for public schools.
Dial’s proposal would phase out the 4-cent tax by 1 cent per year, requiring the Legislature to replace the revenue by bumping up the sales tax on other items by 1 cent over the same time. That would make the state sales tax on most items 5 cents on the dollar by September 2016.
“It would be on anything you buy other than food,” he said. “Socks, toothpaste, anything.”
The bill wouldn’t touch city or county sales taxes on food.
That shifting of sales taxes doesn’t appeal to Kimble Forrister, director of the anti-poverty group Alabama Arise. Forrister has long opposed the tax on food, but says Dial’s proposal doesn’t really lift the burden on poor people.
“Generally, replacing a regressive tax with another regressive tax is not the best strategy,” Forrister said.
Arise supports a competing bill, by Rep. John Knight, D-Montgomery, that would eliminate the sales tax on food and replace the revenue by eliminating an income tax exemption. The state allows residents to write off the money paid in federal income tax when calculating their state income tax.
Forrister said that exemption favors the wealthy, and would more than make up for the money lost if the food tax is eliminated.
Knight’s bill has been before the House multiple times before, and has never passed.
“It doesn’t seem to have any traction this year,” Forrister said.
Calhoun County grocer Mike Sanders said he wasn’t sure if a decrease in sales tax for groceries would increase his profits.
“It will help the consumers,” said Sanders, owner of Discount Foods Inc., which operates a chain of stores in Calhoun and St. Clair counties. “If you spend $100 a week on groceries, that’s $4 in your pocket.”
Sanders said he wasn’t sure the presence of that extra $4 would encourage people to buy more food. He said customers often don’t think about taxes when making choices in the grocery store.
But Forrister believes there could be sticker shock among consumers if Dial’s bill passes and bumps the sales tax on non-food items higher. Many cities across the state already have a cumulative 10 percent sales tax, he said.
Dial said his bill would likely come up for a vote sometime after legislators adjourn for their spring break later this month.
Capitol & statewide correspondent: 256-294-4193. On Twitter @TLockette_Star.