The Alabama House began debating a bill presented by Representative Knight that would eliminate the grocery tax, HB 116.
This bill would eliminate the tax on groceries; however, to make up the foregone dollars from doing away with this tax, the deduction for federal income taxes paid on the state income tax return would be eliminated for certain citizens. According to Representative Knight, a revised version of this bill would allow married couples with an adjusted gross income of $125,000 or less as well as individuals with an adjusted gross income of $75,000 or less to still be able to deduct federal income tax dollars paid from their state income tax return. Adjusted gross income is the income remaining after all deductions and adjustments are made to gross income for the tax year.
While presenting his bill, Representative Knight stated that he does not know of another issue that is as important as removing the sales tax on groceries - he is concerned about the families in Alabama that are struggling to make ends meet and put food on the table. Further, he told members that he has tried to work across party lines with this bill to address issues that are of concern.
Opponents of the bill led by Representative Mike Hubbard ( R ) of Lee County feel that many middle-class, small business owners (particularly LLC’s and LLP’s) will be adversely affected by this bill as it would serve as an income tax increase to them. He said that Republicans are not opposed to eliminating the grocery tax, but are opposed to the methods taken in this particular bill to make up the dollars lost by eliminating the grocery tax. In removing the federal income tax deduction for some, you are essentially taxing a tax by causing filers to pay state tax on the amount of tax they are paying to the federal government. In addition, Rep. Hubbard went on to say that during a time when the economy is in decline and many individuals are losing jobs, now is not the time to increase taxes on small business owners who are working to provide jobs to citizens of Alabama.
If passed, the bill would go for a vote before the citizens of Alabama, but, currently, proponents of the bill do not have enough votes in the House for the bill to be presented for a vote. The chamber is divided down party lines with Democrats supporting and Republicans opposing - Democrats lacked three votes to bring the measure forward, with one of their members, Rep. Laird, voting against it.
Republican Rep. DeMarco of Jefferson and Shelby counties expects to have an alternative bill ready soon, and HB 116 may come back for consideration later this afternoon with some changes.