Alabama 13: Taxing the Dinner Table

Posted: May 09, 2013 6:25 PM EDT Updated: May 09, 2013 11:10 PM EDT
By Jon Paepcke

BIRMINGHAM, AL –

With every bar code swipe, the numbers add up in Alabama.

Did you know that for every dollar you spend on groceries four cents goes to the state?

It’s true.

Did you also know we are one of only three states which charge a full grocery sales tax without a rebate?

Only Mississippi and Kansas join us in that exclusive food tax fraternity.

In fact the Institute on Taxation and Economic Policy put us in their ‘Terrible Ten’ for most ‘regressive taxes’, meaning they claim we put an unfair level of the tax burden on the poor.

According to the Institute, Alabama’s poorest 20% spend about 10.2% of their income on state and local taxes while the wealthiest1% pay out 3.8 %, or 168% less.

“When you’re paying 10.3% of your income just to buy your groceries, for instance, than you don’t have much to do anything else.  So it makes it very difficult for those people to get beyond, it is almost like a poverty cycle,” financial advisor Scott Cole pointed out.

Scott Cole is a local advocate against the state’s grocery tax.

He also agrees with the Institute about the other ‘regressive tax’ they claim puts us in the ‘Terrible Ten’.

They say we are one of only six states which allow residents to deduct from their state income tax, the amount they pay in federal income tax.

“Again, it is upside down.  It’s helping a very few people and burdening a larger portion of the population that doesn’t make a lot of money,” Cole remarked.

Republican Senator Gerald Dial has fought to eliminate the grocery tax.

He has introduced legislation three times for the change, including this year.

His plan?

To phase out the four percent grocery tax over four years and replace it by adding one percent to the state general sales tax.

“The ironic thing is when you do that, the one cent on general sales almost makes up for the 4 cents on food tax so they almost balance.  So you do not get a tax increase.  You get tax off of food, you get taxes on things that are non-necessity,” Dial stressed.

Dial’s bill made it out of committee but a lobbying group called ARISE stirred up enough opposition to kill the bill.

The group is against replacing the grocery sales tax with another sales tax.

It wants to get rid of the federal income tax deduction we mentioned.

“That’s not going to happen in this legislature.  That’s not going to happen in the next 20 years,” Dial stated.

When asked why, he replied, “Because the voters of this legislature are not going to approve that because it is double taxation.  You are going to tax my money twice.”

So if the state did get rid of the grocery tax would Dial’s plan really work?

On the other hand, would removing the income tax deduction be enough to fill the food tax void?

When we asked the Legislative Fiscal Office, they told us yes and yes.

Right now the grocery tax brings in about $300 million a year.

If we added just one percent to the general sales tax, the estimated $370 million that would produce would more than make up the difference.

Finally, if people could no longer deduct their federal income tax from how much they pay Alabama, the state would see an increase of $486 million every year.

Then there is the one thing the Institute on Taxation and Economic Policy gives us progressive kudos on:  Our well-documented low property taxes.

We sat down with Senate Majority Leader Jabo Waggoner to explore that grocery tax alternative.

We asked him what the probability was of raising Alabama’s property taxes to bring it more in line with the rest of the country.

“I would say slim and none.  You know with the Republican majority in the Alabama Legislature, you hear very little about raising taxes,” Waggoner replied.

Everyone we spoke with agrees the grocery tax has got to go.

Agreeing on what goes in its place, could be tougher than finding items like evaporated goat’s milk, or Major Grey’s chutney.

Like we said, the Institute on Taxation and Economic Policy put us on their list of ‘Terrible Ten’ states with the most regressive tax structure.

Their most regressive?

Washington State.

Even Florida and Tennessee fared worse than Alabama.

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