Wednesday, April 1, 2009

Bill to Remove Grocery Tax Fails Again

As lawmakers met late this afternoon, atop the House calendar was Representative Knight’s bill that would remove the state’s 4 cent sales tax on groceries. This is the same controversial bill that shut down the House last week after the bill failed to receive enough procedural votes to go before the House.

This afternoon, new measures were included in the bill attempting to reach a compromise that would move the legislation along. By removing the sales tax on groceries, the state must seek alternative methods to make up the approximate $426 million that is generated each year through this tax.

The controversial portion of this bill revolves around the manner in which the state will make up those foregone tax dollars. Under this legislation, those dollars would be made up by phasing out the federal income tax deduction on the Alabama income tax return over three years. By year three, married couples with an adjusted gross income of $125,000 or more as well as individuals with an adjusted gross income of $75,000 or more would lose their federal income tax deduction.

Opponents to this bill feel that small businesses (including S-corps, LLC’s, and LLP’s) will be adversely affected. They purport that the $426 million tax burden would be placed on 10% of the state’s population.

The bill failed to receive enough votes again for consideration on the House floor.

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