Alabama is one of three remaining states that tax groceries, but if advocates have their way, the state could soon get rid of the levy in this year’s legislative session.
State Sen. Merika Coleman, D-Pleasant Grove, wants to eliminate the state’s 4% tax on groceries and replace that income by ending the state’s state income tax deduction for federal income tax.
“We call this the FIT, or FIT deduction, and it should give you a fit,” Coleman said in a release. “You should have a fit, because it’s an unfair tax break that disproportionately lowers taxes for the wealthiest people.”
Alabama Arise, a nonprofit group that works to help those “marginalized by poverty,” says that any grocery tax reduction should allow for Supplemental Nutritional Assistance Program-eligible foods (rather than only foods eligible under the Special Supplemental Nutrition Program for Women, Infants, and Children program) to be untaxed. The organization says doing so would increase the number of untaxed items, prevent confusion and reduce the difficulty of implementation for retailers.
“We’re here today to ask our lawmakers to end the state grocery tax quickly and responsibly,” Alabama Arise Action board president Kathy Vincent said in a release. “This is the year to finally untax groceries once and for all.”
Not everyone supports the grocery tax elimination. The nonpartisan Tax Foundation argues that a complete rate reduction of income or sales taxes, along with a targeted grocery tax credit, would be a better solution. Alabama is one of three states, along with Mississippi and South Dakota, to levy a tax on groceries.
Alabama’s combined sales tax averages 9.25%, the fourth highest nationally, according to the Tax Foundation. In Alabama’s largest cities, such as Birmingham, Huntsville, Mobile, and Montgomery, the tax rate is 10% when local taxes are combined with the state’s 4% levy.
“Exempting groceries from the sales tax base reduces economic efficiency without achieving its objective of enhancing tax progressivity,” said Janelle Fritts, policy analyst for the Tax Foundation. “If the goal of exempting groceries is to lower tax burdens for all residents of a state, reducing sales or income taxes across the board would better accomplish this goal, and if the goal is to help those with lower incomes, targeted grocery tax credits would do more good than a grocery tax exemption for everyone.”
Research by the Tax Foundation found that the poorest households experience 9% more sales tax liability with a grocery tax exemption than if groceries were taxed and the overall sales tax rate was reduced. According to the study, low-income households spend more on groceries as a share of income and that explains the increased sales tax liability.
Republished with the permission of The Center Square.
