Tax repeal faces fight

By Karen Middleton
karen@athensnews-courier.com

May 07, 2008 10:31 pm

— Proponents of removing the state sales tax on food say with just two days left in the legislative session and some last-minute add-ons, passage might be difficult.
Sen. Tom Butler, D-Madison, said late Wednesday that he was “looking at it seriously” but that the bill is “tied up in negotiations.”
The bill, sponsored in the house by Rep. John Knight, D-Montgomery, and in the Senate by Sen. Hank Sanders, D-Selma, has passed the House. It would amend the Alabama Constitution to make three changes:
• Remove the state portion of the sales tax on groceries. The local sales tax would still apply, so the cost of groceries would be 4 percent lower.
• Raise the income tax threshold in 2009 to $20,000 for a two-parent family of four.
The standard deduction for middle-income families, now $4,000, will rise to $11,100 and be indexed for inflation; the standard deduction for singles, now $2,000, will rise to $5,550; the dependent deduction for middle-income families, now $500 per child, will rise to $2,200; the personal exemption, now $1,500 per adult, also will rise to $2,200.
• Remove the state deduction for federal income taxes.
This tax reform plan is revenue-neutral. It will not cost the Education Trust Fund one cent.
Knight says that passage of the bill hinges on a few key legislators, among which are Butler and Sen. Arthur Orr, R-Decatur.
“I think everyone in the world would like to remove the food tax,” Butler said. “Also, raising the minimum tax threshold to $20,000. It is costly, but I would like to see it. Both parties are in favor of it.
“But with two days left, there is a lot of legislation that needs to pass, including my local legislation on the rock quarry. I don’t know if this will come up tomorrow (today) or on May 19. The budget is up for debate tomorrow and several appropriations bills. Tomorrow should be a long day. I don’t know how long it will take to debate the budget.”
Butler said he couldn’t make a commitment to support the food tax repeal bill because of the “interlocking or linking” of other bills.
“You can’t give everybody all they want without getting something your district needs in return.”
One of the give-to-get issues is a Republican move to end annual property reappraisals for homes statewide.
Orr said he has long been a proponent of ending state taxation of food, but there are concerns on how the state would pay for the cut.
“The Legislative Fiscal Office said there will be a $25 million net increase in total tax collections, but the Department of Revenue says there will be a $70 million loss to the Education Trust Fund,” Orr said. “It’s difficult to find accurate figures. I don’t think we should pass this in haste. You have to ask, will cities and counties take the revenue if the state gives it up? I’ve really been struggling with this. I support it in principal, but I have concerns about blanket approval as it is presented.”
Orr also said that he has gotten conflicting figures on who would have to pay higher taxes to make up for the lost revenue.
“What is the breakpoint of where taxes will go up?” said Orr. “I’ve heard that it’s $130,000, but the numbers I get from the Department of Revenue are for those filing singly is $41,000, and those filing jointly is $70,000. Those are the people that may see their tax bill increase.”
Meanwhile, the Silver Haired Legislators and the American Association of Retired Persons favors the bill’s passage.