Posted by For three legislative meetings the first bill considered was HB 116 by Representative John Knight. The bill would remove the state sales tax on groceries and in exchange phase out the federal income tax deduction.
House Republicans has blocked this measure being brought up for debate. House Republicans claim the removal of the federal income tax deduction would harm small business.
Representative Knight moments ago addressed this issue head-on with four specific tax examples. Consider the following:
A small business with an adjusted gross income of $300,000 of which $100,000 was income from Alabama, $100,000 was income from Georgia, and $100,000 was income from Florida would have a negative tax of $10,533. In other words they would pay no state income tax.
A small business with an adjusted gross income of $600,000 of which $200,000 was income from Alabama, $200,000 was income from Georgia, and $100,000 was income from Florida would have a negative tax of $43,972. In other words they would pay no state income tax.
A small business with an adjusted gross income of $1.5 million of which $500,000 was income from Alabama, $500,000 was income from Georgia, and $500,000 was income from Florida would have a negative tax credit of $138,962. In other words they would pay no state income tax.
A business with an adjusted gross income of $21 million of which $7 million was income from Alabama, $7 million was income from Georgia, and $7 million was income from Florida would have a negative tax of $1.2 million. In other words they would pay no state income tax.
To make matters worse the negative tax can be carried over from year-to-year and amounts to a credit in the event the business ever has taxable income.
It is just wrong for the removal of state sales tax on groceries bill to be blocked by House Republicans. It is a vote that cannot be justified no matter how hard one tries.
I believe the truth is that House Republicans fear this measure being on the ballot at the time they seek election in 2010.
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Why not simply split the bill into tow bills, one a tax cut and one a tax increase?
If the intent is to reduce working folks taxes, it would seem the expedient thing to do.
Then you end up with a decrease in funding for the already $$$ challenged Education Trust Fund budget, because the bill to remove the grocery tax would pass overwhelmingly, while the Republicans would still block the tax increase. That is why the special efforts have gone into making the bill that keeps failing revenue neutral, so that it is not an increase in the bottom line, but spreads tax equity. By the way, I am one of those that would pay more taxes, but think it is the right thing to do and have fussed at both my Representative and Senator for opposing the efforts. Interestingly, the folks at PARCA recently did a study applying the tax system in surrounding states to Alabama – in each one our General Fund and Education Fund would do significantly better, and it seems that the people in those states are not feeling drastically overtaxed. At some point, we have to realize we get the government we pay for.
Concur totally about the need to keep the budget in balance and the need for government services to be funded. Think you would agree with me that state government has been delivering services beyond the people’s willingness to pay and hard decisions by the citizens will be needed.
My preference is for bills to fully and honestly debated instead of the usual name calling and other human tendencies.
If the intent is to raise taxes on high income folks then say so, if the intent is to lower taxes for the working folks, then say so. Don’t use one as a smoke screen for the other.
Landingham – the tax decrease would never pass without a balancing factor because Paul Hubbert wouldn’t let it pass. The only reason he allows this bill to gain traction is because it is being paid for by higher income citizens and small businesses. John Knights examples are cute, but the money has to be coming from somewhere!!!
By the way, the ETF is NOT a challenged budget – graph it over the past 12 years and you will see SIGNIFICANT increases (mainly in teacher and support staff salaries and benefits).
Alabama is being run by the education union and the only way to stop that is to make people aware of it.
Why not simply split the bill into tow bills, one a tax cut and one a tax increase?
That’s easy.
Because moves like DO NOT allow a tax increase on some Alabamians which would require a vote of the people and help the Democratic “get out the vote” campaign in 2010.
Keep in mind that is what this whole debate is about.
Both sides want to remove the tax, the GOP wants it gone too, but the Democrats want the tax increase because Alabama’s constitution requires a vote of the people to raise taxes. If this were not true they would remove the tax increase from every effort to remove the grocery tax.