Gov. Bentley wants to eliminate the sales tax on groceries

MONTGOMERY, Ala. — In an about-face from his previous policy proposals, Gov. Robert Bentley (R-Ala.) wants to cut a tax. During his annual State of the State Address, Bentley said that he wants to repeal Alabama’s grocery sales tax.

“A task force made up of experts from fields such as education, healthcare, taxation and revenue, and the economy will study the impact of removing the sales tax on food,” Bentley said. “The group will compare best practices from comparable states and deliver its recommendation to me this Fall. I want to remove the state tax on food.”

Alabama is one of only 14 states that levies a sales tax on groceries. It is only one of seven states that taxes such items at the normal sales tax rate, and one of four that provides no relief.

Alabama’s budgetary structure relies heavily on the sales taxes and is therefore largely dependent on consumer spending. The sales tax, along with other so-called “growth taxes”, all go to the Education Trust Fund Budget while the state’s General Fund is fueled by a hodge-podge of over 40 miscellaneous revenue streams. Such a set up has been shown to cause instability, with the two budget system resulting in a paradox of a concurrent surplus and a shortage in 2015.

The system also leads to fairly high sales tax rates. A report from the Tax Foundation reveals that two Alabama cities – Birmingham and Montgomery – have the second highest effective sales tax rates in the country for cities with over 200,000 people.

Alabama only has a four percent statewide rate; good enough for twelfth lowest in the country. However, the state tax code allows for localities to tack on an additional 7 percent, which they do at an average of 4.97 percent.

Many who support a reliance on sales taxes tout it as superior to an alternative increase on income taxes. In addition, advocates for such a system believe that a sales tax heavy formula will keep taxes low, as the people would feel the bite much more if everything they bought came with a double-digit sales tax. Tax increases would be more visible — and more unpopular for politicians to propose.

However, those that oppose a reliance on sales tax note that it is much tougher to keep track of how much money one contributes to the government. Unlike an income tax, sales taxes do not come with a year-end receipt. Citizens can never truly know how much they paid in without keeping track of an endless sea of receipts.

Governor Bentley infamously reneged on his promise not to raise taxes during the 2015 legislative session, when the state faced a General Fund Budget shortfall. In February of the year, the governor released a plan containing eight tax hikes, some of which became law.