Still Opportunities to Cut Taxes on Groceries

I have long supported cutting taxes as an effective means of stimulating the economy and providing citizens the financial relief they deserve, and Republicans in the legislature are no different. In the past few years, we have successfully promoted the first state income tax cut in more than 70 years and pushed an historic small business tax deduction that assists employers in providing affordable health insurance coverage to those who work for them despite opposition from well entrenched special interests.

Given this history of tax reform, you may ask yourself why House Republicans voted as a group this week to block a bill that would remove the state sales tax from groceries and food items. To be honest the answer is that the bill was just too good to be true.

Rep. John Knight (D – Montgomery), did make an honest effort to remove the four percent state sales tax from groceries, but it paid for the measure by repealing the state tax exemption on federal income taxes that you pay to the government. The net result would be one group of Alabama citizens reaping most of the benefits while another group of taxpayers absorbs all of the pain.

If this legislation were enacted, approximately one-third of taxpaying families in the state would see their taxes increase dramatically, and small businesses organized as limited liability companies would experience substantial increases at this time of unprecedented economic turmoil.

When coupled with the upcoming expiration of the Bush tax cuts and the new federal income tax increases will occur under President Obama’s budget in 2010-2011, many Alabama families and small business owners would find their personal finances crippled under the plan that came before the House.

We are in the worst economic crisis in generations. Wall Street is on a rollercoaster ride, and small business owners are worried about simply keeping the doors open at their current level of taxation. Now is simply not the time to raise taxes on any segment of the economy.

There are alternative methods to removing the sales tax on groceries, and if can just sit down in a true bi-partisan manner then I believe we could agree on a plan that does not require their $100 million tax increase. In Idaho for example a tax program has been created that provides citizens who file state returns with a year-end rebate for the grocery taxes they pay. This system of would allow for Alabama to give as meaningful tax break to those who deserve it the most- those who annually make less than the state or federal poverty level for income.

Everyone agrees that there is a real need to reform our tax code by slashing state taxes on groceries, but a multi-million dollar tax increase is definitely not the way to achieve this goal. A real, bi-partisan discussion on this issue would help all of our citizens get beyond the rhetoric and into solving real problems facing our state.