The Alabama Policy Institute (API) announced it supports a bill repealing the tax on groceries. API added the bill to its annual legislative scorecard for the 2022 Alabama Regular Legislative Session.
House Bill 174 is sponsored by State Rep. Mike Holmes (R-Wetumpka).
HB174 would exempt food from state sales and use taxes. The state presently charges 4% on groceries. Alabama is one of the few states to do so.
“Groceries are exempt from state sales taxes in most of the country, with only 13 states taxing groceries at all,” said API President & CEO Caleb Crosby in a statement. “Out of the 13 states that do tax groceries, only Alabama, Mississippi, and South Dakota tax them at the full amount without any credit or rebate.
“With state budgets hitting record high after record high, it is past time for Alabama to end this tax,” Crosby continued. “The fact is that Montgomery is flush with cash. State leaders need not pretend that the sales tax on our bread and milk is essential.”
"It is time to pursue this matter without the old fallback of raising taxes elsewhere," API Chief Policy Officer and former State Sen. Phil Williams (R-Rainbow City) said. "This should be a matter of giving back, not amending to avoid a true tax cut."
HB174 is a bipartisan bill with over a dozen cosponsors. API leaders said that the bill will be considered a ‘Yes’ vote on this year’s legislative scorecard, the API Watchlist.
Some legislators warn that today’s historically high budgets are the result of an infusion of federal dollars from the CARES Act and the American Rescue Act and that once these federal subsidy dollars are exhausted state revenues will return to their more historic norms and that the state cannot possibly sustain the loss of the grocery tax funds – an estimated hit to state budgets of $600 million.
State Sen. Andrew Jones (R-Centre) has introduced legislation that would repeal the sales tax on food but replace the lost revenue by eliminating the federal income tax exemption. Senate Bill 43 is a constitutional amendment that would be more or less revenue-neutral.
SB43 would shift the tax burden from retirees and working families to upper-income earners. Conservatives have opposed this proposal in the past because it would hit small business owners and job creators the hardest. They argue that states like Florida and Texas with no state income tax have a competitive advantage already over Alabama and striking the federal income tax exemption would only make the state less attractive to business.
The Alabama State Legislature will be in session on Tuesday for day three of the first 2022 special session. The 2022 regular session will resume on Feb. 1.
1819 News is a wholly-owned subsidiary of the Alabama Policy Institute, which has been one of the strongest voices in the state, promoting and preserving Alabama Values for 33 years. Oversight for 1819 News is provided by a separate not-for-profit board of directors.
Alumni of the Board of Directors and former API staff have served, or are serving, at all levels and in every branch of state and federal government.
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