The Senate Finance and Taxation Education committee Wednesday approved legislation that would phase out the state’s sales tax on groceries over the next three years, replacing the lost revenue with a one percent increase in the state’s general rate.
The bill, sponsored by Sen. Gerald Dial, R-Lineville, now goes to the full Senate for consideration.
Alabama is one of the last states to fully tax groceries in the state, and repeal of the tax has long been a goal of anti-poverty advocates. However, Alabama Arise and other organizations have expressed skepticism about Dial’s approach, which would gradually raise the state’s general sales tax rate from four percent to five percent.
Under the proposal, the sales tax on food in Montgomery would drop from 10 percent to 6 percent by 2017; sales tax on other items would rise to 11 percent. Critics of the proposal who spoke at a public hearing last week said those who benefited from repealing the sales tax would find other essentials, like clothing, more expensive if it went into effect.
Sen. Hank Sanders, D-Selma, said Wednesday the increase in general sales tax — which would not affect big ticket items, such as automobiles — would end up hurting those the bill is intended to help.
“People who receive food stamps do not pay sales tax,” he said. “Those at the very bottom end up paying sales tax on these increased items.”
Democrats and other advocates have tended to favor an approach long championed by Rep. John Knight, D-Montgomery, that would get rid of the sales tax on groceries and make up the lost revenue by repealing the state’s federal income tax deduction. However, Dial and other Republicans have said the proposal has no chance of passage in the current session.
Senate Finance and Taxation Education committee chairman Trip Pittman, R-Daphne, said in response to Sanders that the tax increase was a means of funding the repeal.
“The intent of taking tax off groceries is worthy, but he’s also trying to pay for it, too,” he said.
– posted by Brian Lyman