Ken Hare In Depth: State tax on groceries wrong, but no easy fix

The debate over eliminating Alabama's state sales tax on groceries is not just a perennial source of debate in the Alabama Legislature -- the issue regularly comes up in the annual session of the state's Youth Legislature as well.

But unlike their adult counterparts, the high school students around the state who attend the YMCA-sponsored Youth Legislature are more likely to pass their bills to eliminate the state's 4 percent sales tax on food items sold in grocery stores.

However, most of the bills by the young people do not seriously address the issue of how to replace the revenue that would be lost to public education in the state --  estimated to be as much as $370 million per year.

In the real world, the adult lawmakers would be irresponsible if they did not take the loss of revenue into account, and that has been the sticking point in getting legislation approved.

Over decades of writing about this issue, I do not recall ever interviewing a legislator who did not claim to be in favor of eliminating the sales tax on groceries. They recognize that it is wrong to tax groceries. But even though there has been a bill in virtually every legislative session two decades or more, no such bill has ever passed.

While there is strong support for wiping away the state portion of sales taxes on groceries, there has never been a consensus among legislators (or interested lobbyists) on how to replace the lost revenue.

This year, Sen. Gerald Dial, R-Lineville, is again proposing to eliminate the state's 4 percent sales tax groceries over a three-year time span. Dial's bill would phase in an increase to the general state sales tax on most non-grocery items from 4 percent to 5 percent over the same three years to offset the revenue lost to the state.

[DOCUMENT: Dial bill SB287 (.pdf)]

Dial's approach would easily make up the difference in revenue lost from eliminating the sales tax on groceries. In fact, the 1 percent increase in the general sales tax would probably raise several million dollars a year more than would be lost. In other words, it would amount to a tax increase.

Dial would address that by requiring the Legislature in 2018 to review the act and adjust it to make the law "revenue neutral."

The problem with Dial's approach is that it would push the combined state and local sales taxes on non-grocery items to a whopping 11 percent in some Alabama communities, including Montgomery.

The combined state and average local sales tax rate in Alabama already is the eighth highest in the nation, according to the national Tax Foundation.

In addition to Alabama's state sales tax of 4 percent, cities and counties have an average local rate of 4.45 percent, for a combined average rate of 8.45 percent.

Just as he has for many years, Rep. John Knight, D-Montgomery, has filed a bill that would eliminate the sales tax on groceries and make up the lost revenue by eliminating the ability of Alabamians to deduct the amount they pay in federal taxes when they file their state tax returns.

As an editorial writer, I endorsed this approach many times. It would shift the tax load from a regressive tax on food to the progressive income tax. In other words, it would shift the burden more to people better able to afford to pay the tax.

But there is a very serious problem with Knight's approach -- it won't pass. Not in the past, not this year, and probably not in the near future.

Even if Knight's approach is made revenue-neutral, it's going to look like a tax increase to wealthy voters and probably to some middle-income voters as well.

If Democrat Knight, who used to be chairman of a House budget committee, couldn't get this bill passed when his fellow Democrats controlled the Legislature, he doesn't have a prayer of getting it passed now that the Republicans have a supermajority in both chambers.

And that is sad, because every state but Alabama and Mississippi gives consumers some sort of tax break on groceries.

Thirty-one states exempt most food purchased for consumption at home from the state portion of sales tax. Seven states tax groceries at lower rates than other goods. Five states tax groceries fully but offer credits or rebates offsetting some of the taxes paid on food by some portions of the population.  And five states have no sales tax at the state level.

Opponents of Alabama's state sales tax on groceries may have missed an opportunity several years ago to get a compromise solution that would have eliminated the tax. During former Gov. Bob Riley's first term, the state's education revenues were growing by double-digit percentages and Riley was at least willing to work to find middle ground.

But now growth in the education budget is far below what it was in those economic boom days and the elected officials who are in office are afraid of having even the slightest connection to any proposal that looks like a tax increase. So the chances of eliminating the sales tax on groceries while raising it elsewhere appears slim.

I'm writing this column while sitting in the press room adjacent to the chambers of the Alabama House of Representatives. But instead of the state's elected representatives, the chamber is filled by high school students from around the state who are taking part in the 66th session of the Alabama Youth Legislature. Two floors up, the Youth Legislature's Senate is also meeting. I am one of the volunteer advisers to some impressive young high school students who are serving as members of the news media. During the three-day session of the Youth Legislature, they published several editions of a newspaper, took photos and videos, did online blogs and kept delegates informed via social media.

If past is prologue, then 15 or 20 years from now several of the delegates to this year's session of the Youth Legislature could be serving as real legislators, and a few of these bright young people could be real journalists.

I hope that they will not still be wrestling with the issue of how to eliminate the state sales tax on groceries. But I'm afraid that a majority of today's adult lawmakers, like their predecessors, will be content to leave it to today's young people to solve this problem.


Ken Hare was a longtime Alabama newspaper editorial writer and editorial page editor who now writes a regular column for WSFA's web site. Email him at