Thursday, April 2, 2009

Groceries at the Statehouse

Reminiscent of Governor Sanford in South Carolina bringing two pigs into the statehouse named Pork and Barrel in expression of his frustration with the out of control spending, Representative Knight wheeled in a shopping cart with $50 worth of groceries as an example for his grocery tax bill. He wanted this illustration to show the challenging numbers of the reality of just how much it costs to buy groceries for home and how little $50 purchases today.

Montgomery has a 10% sales tax, so the tax on his purchase was $5 which Rep. Knight expressed was “criminal”. It is important to note that the proposed bill only removes the state’s 4 cent portion of the grocery tax; counties and cities would still be able to tax grocery items. In this instance, if this bill were enacted, this same cart of groceries would still carry a sales tax of $3 in Montgomery.

Some argue that the language in the proposed bill actually prohibits counties and cities from removing their portion of the tax on groceries. HB 116 states on page 3 that “Local governments shall continue to levy sales taxes on food at the same rate collected for the local portion of the retail sales tax.” Represenatative Knight feels that this is not so. He stated that the bill would prevent local governments from raising their sales tax on groceries.

It is also argued that this bill creates a tax increase on those individuals that will be affected by losing their federal income tax deductions on their state income tax return. On the fiscal notes to the bill, it states that “if ratified, will increase revenue to the Education Trust Fund by an estimated $426 million annually and will reduce revenue to the Education Trust Fund by an estimated $364 million annually.” Using this date, there would be an estimated tax revenue increase to the Education Trust Fund by $62 million.

Once again, the bill failed to gain enough procedural votes in the House to move forward; however, lawmakers promised to continue working on this issue. Removing the state grocery tax may be gone for today but certainly not for good.

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