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.

Alabama to Receive $3 Billion from Economic Stimulus Package

If you are wondering where the dollars from the federal economic stimulus package are going, we now know that Alabama can count on 3 billion of those dollars.

A hearing was held this afternoon in the House chamber relating to the money that will be coming into Alabama. Jim Main (state director of finance), Drayton Neighbors (appointed by Governor Riley to oversee disbursement of stimulus money), and David Perry (also assisting with oversight of stimulus money) were present to answer questions and give an update on where Alabama is in the process.

Apparently, the dollars available for states to receive from the stimulus package are divided into two pots. From the first pot, we know that Alabama will receive $3 billion dollars. The second and larger portion of money represents dollars that states can compete for.

The $3 billion will be allocated in our state as follows:

$1 billion to education
$1 billion to general fund
$1 billion to be divided equally between transportation and existing programs (programs under ADEM)

So that Alabama may be more competitive and efficient in competing for dollars from the second pot of stimulus money, all agencies have been divided into 4 working groups: public safety and law enforcement, economic development, health and human services, and education. These groups will be provided the resources necessary such as grant writers, information, and etc. to make them as competitive as possible for those federal dollars.

In addition to providing states with additional dollars to fund programs and projects, the ultimate goal of the stimulus money is to create and maintain jobs. As a basic formula, for each $1 billion dollars spent, an estimated 28,000 jobs should be maintained / created.

The federal government is requiring states to report how many jobs have been created and / or maintained due to the receipt of these dollars. The first reporting period is in July of this year and figures will be placed on a public website for viewing.

For more information regarding the economic stimulus dollars coming into Alabama, a website has been established at