Alabama Grocery Tax Cut Targeted by Governor’s Task Force

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By Chris Marr

Alabama’s sales tax on groceries could be on the chopping block after Gov. Robert Bentley (R) formed a task force to study eliminating the tax and ways to potentially pay for it.

Bentley’s order (Executive Order No. 28) instructs the task force to study “best practices and tax structures from other states” with the goal of reducing or eliminating the state’s 4 percent sales tax on groceries. The governor’s order, signed Feb. 21, requires the task force to provide recommendations by June 1, after the conclusion of the Legislature’s 2017 regular session.

“My goal for this task force is to actually take 4 percent off of food items and put that money back in the pockets of the Alabamians who need it the most,” Bentley said in a Feb. 21 press conference.

Eliminating the tax would cost the state’s education budget between $300 million and $400 million annually, legislators involved in the task force estimated, although they said the money could recirculate in the economy as people spend it on other items. Bentley said he has no plan to replace the lost revenue with another tax, but will listen to the task force’s recommendations.

“That money will turn over in the economy,” Rep. John Knight (D) said at the Feb. 21 press conference.

“This is something that is not new. We’ve been trying it for many, many years,” he said and commended the governor for the progressive proposal.

Providing relief from the tax on groceries is a perennial issue raised by Alabama’s Democratic legislators and advocacy group Alabama ARISE, but each year the proposal fails over concerns of how to pay for it, said Bruce P. Ely, state and local tax attorney at Bradley Arant Boult Cummings LLP in Birmingham. Alabama is one of only a handful of states that hasn’t reduced or eliminated the tax on groceries, he told Bloomberg BNA on Feb. 23.

‘Question of How.’

“Most people in Alabama believe the poor should be relieved of the grocery tax. It’s just a question of how,” Ely said.

The Democratic cause and Alabama ARISE consistently propose eliminating the deduction for federal income tax paid to offset the lost revenue from the grocery tax. But Ely said the deduction is protected by the state constitution, and voters would likely reject amending it out. He also said nixing the deduction would bring about twice as much revenue as the amount lost from the grocery tax.

“Everybody’s a little skeptical about that trade,” he said.

Ely drafted a proposal for the state House in 2009 that he said he’d like to see the task force consider: creating a refundable tax credit to reimburse low-income families for the sales tax they pay on groceries.

At the time, the estimated impact was a state revenue loss of $20 million to $25 million, as opposed to $364 million for a full exemption of groceries from the state sales tax, Ely said.

To contact the reporter on this story: Chris Marr in Atlanta at cMarr@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the governor's order is available at http://src.bna.com/mrl.

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