Paying for groceries at a reduced rate
Published 12:00 am Wednesday, April 2, 2008
The issue: Two legislative committees vote to remove grocery tax.
Our position: A balance must be struck in shifting the tax burden.
The House Government Appropriations committee and the Senate Finance and Taxation-Education Committees of the Alabama Legislature have approved identical constitutional amendments that would eradicate the state’s 4 percent sales tax on groceries.
For most, that move comes as a welcomed relieve from a regressive tax. Sales taxes and consumption taxes are usually called regressive because of their set rate structure.
In the Senate, Selma Democrat Hank Sanders is the sponsor of the bill. Sanders knows well the challenges of the poor because he sees it here every day in the Black Belt, in Dallas County and in Selma.
The sales tax on groceries, for example, is considered undesirable because poorer people pay a greater percentage of their income in tax than wealthier people.
Here’s the way it works: If you go to Pensacola, Fla., and buy $100 worth of groceries, you pay $100. If you buy $100 worth of groceries in Selma, you pay $100 plus 4 percent in state taxes and then local sales taxes.
Alabama and Mississippi are the only states with taxes on groceries, and they don’t offer a rebate or lower tax rate.
A similar proposal sponsored by state Rep. John Knight, D-Montgomery, failed during the 2007 session because he proposed eliminating the deduction for federal taxes paid. Knight is the champion of this bill in the House.
Alabama, Iowa and Louisiana
still allow the deduction. But studies show that elimination of the deduction for federal taxes paid would generate more than $500,000, which would cover the grocery tax elimination. This deduction benefits those who make more than $300,000 a year or about 20 percent of state taxpayers. The other 80 percent see little or no savings.
Voters should have an opportunity to vote on this soon.