Arise 2020: End Alabama’s state grocery tax and protect school funding

The Bible says that “to everything there is a season.” And we’re increasingly optimistic that the season has finally arrived for real tax reform in Alabama.

For more than a decade, Alabama Arise has worked to end the state’s 4% sales tax on groceries. It’s a regressive, punitive tax that costs struggling Alabamians the equivalent of two weeks’ worth of groceries each year. Legislation to untax groceries passed the House in 2008 but came up one vote short in the Senate. Arise has supported similar legislation in the years since, but it hasn’t come that close to passage again.

So why wouldn’t the Legislature cut the state sales tax on groceries? Ending a regressive and unpopular tax would seem to be an easy lift for even the most skeptical legislator. And that would be true if the vote were simply to end the state grocery tax.

But eliminating the tax without replacement revenue would strip $480 million out of the Education Trust Fund (ETF) budget. It would be irresponsible to take that much funding away from public schools, especially given Alabama’s history of underfunding education. Whether and how to replace that revenue has been a sticking point in the grocery tax debate.

How to untax groceries without costing education a dime

It’s crucial to replace the grocery tax revenue without hurting the people who would benefit most from the tax’s elimination. Fortunately, Alabama has a way to untax groceries while protecting both struggling families and education funding.

That solution would be to end an unusual tax loophole that primarily benefits the richest Alabamians: the federal income tax (FIT) deduction. This loophole allows people to deduct their federal income tax payments on their state income taxes. Because wealthy people pay more in federal income taxes on average, 80% of the FIT deduction’s benefit goes to the top 20% of taxpayers in Alabama.

The FIT deduction is a skewed tax break for rich households. And it’s one big reason Alabama’s tax system is upside down. For those who earn $30,000 a year, the deduction saves them about $27 on average. But for the top 1% of taxpayers, the FIT break is worth an average of more than $11,000 a year.

Most Alabamians would get a tax cut from untaxing groceries and ending the FIT deduction. Here is the estimated net tax change as a share of income if Alabama eliminated its federal income tax deduction and state sales tax on groceries. Bottom 20%: -2.78%. Next 20%: -1.21%. Next 20%: -0.9%. Next 20%: -0.47%. Next 15%: 0.04%. Next 4%: 0.49%. Top 1%: 0.95%.

Only two other states offer a full FIT deduction like Alabama does.  (Three other states offer a partial deduction.) Ending the FIT deduction would bring an additional $782 million a year into the education budget, according to the Institute on Taxation and Economic Policy. (Ending the FIT deduction on corporate income taxes would raise another $100 million or so.) That would be more than enough to remove the state sales tax on groceries without hurting public schools. And for a large majority of Alabamians, the net result would be a tax cut.

Legislators also are exploring the idea of untaxing groceries and replacing the revenue by capping the FIT deduction. SB 144, sponsored by Sen. Andrew Jones, R-Centre, would end the state grocery tax and limit the FIT deduction to $6,000 for individuals and $12,000 for couples. The bill wouldn’t raise additional money for education, but it would cover the cost of untaxing groceries.

Most Alabamians would get a tax cut from untaxing groceries and capping the FIT deduction. Here is the estimated net tax change as a share of income if Alabama capped its federal income tax deduction at $6,000 for a single tax filer and $12,000 for a couple filing jointly. Bottom 20%: -2.81%. Next 20%: -1.31%. Next 20%: -1%. Next 20%: -0.62%. Next 4%: 0.31%. Top 1%: 0.93%.

You can help end the grocery tax this year

We’re seeing promising signs that 2020 could be the year the Legislature finally ends the state grocery tax. After passing an unpopular gas tax increase in 2019, some key legislators have been talking about giving a tax break to families hit hardest by higher transportation costs.

Arise has met with many legislators in recent months to discuss the importance of taking the state sales tax off groceries. We’ve found widespread agreement that the time is right to make that happen. And many legislators are finally willing to consider closing the unfair loophole that the FIT deduction opened up in our income tax system.

We need you with us as we work to untax groceries and protect education funding in Alabama. Please join Alabama Arise or renew your membership today to add your voice to our chorus for change. Together, we can build a better Alabama!

Updated March 10, 2020.

How Alabama can untax groceries and boost education

Alabama has two intertwined structural problems that, together, keep us from meeting our people’s most basic needs. One problem is that our state’s tax system is upside down. Rich people get huge tax breaks, forcing people with low and moderate incomes to make up the difference. The other problem is that this upside-down system doesn’t raise enough money to support schools and other vital services adequately.

Two major drivers of Alabama’s regressive tax system are a sales tax on groceries that hurts working families and a skewed income tax break that overwhelmingly benefits wealthy people. Alabama Arise has a longstanding plan to address both problems: Eliminate the state grocery tax and end the state deduction for federal income taxes (FIT).

Untaxing groceries without replacing the revenue would take $480 million annually away from education, hurting our children and our future. But by ending the FIT deduction, Alabama could bring in more than $800 million a year in new revenue.

That’s more than enough to replace lost revenue from the grocery tax. It also would allow our state to invest hundreds of millions of dollars in K-12 and higher education.

Ending the grocery tax and the FIT deduction would make our state’s tax system stronger and fairer. About four in five Alabama households would get a tax cut overall. And the net tax increase for those who would pay more generally would be modest. Even for the top 1%, the average increase would be less than 1 percentage point of income.

Arise’s tax reform plan would boost education funding and help millions of Alabamians make ends meet. This would increase opportunity and shared prosperity across our state.

This blog post originally appeared as an article in Arise’s September 2019 newsletter.

Alabama Arise members vow to renew ‘untax groceries’ push in 2020

Ending the state sales tax on groceries is one of the top goals on Alabama Arise’s 2020 legislative agenda. Nearly 200 Arise members picked the organization’s issue priorities at its annual meeting Saturday in Montgomery. The seven issues chosen were:

  • Tax reform, including untaxing groceries and ending the state’s upside-down deduction for federal income taxes, which overwhelmingly benefits rich households.
  • Adequate budgets for human services like education, health care and child care, including Medicaid expansion and investment in home visiting services for parents of young children.
  • Voting rights, including creation of automatic universal voter registration and removal of barriers to voting rights restoration for disenfranchised Alabamians.
  • Payday and title lending reform to protect consumers from getting trapped in deep debt.
  • Criminal justice debt reform, including changes related to cash bail and civil asset forfeiture.
  • Death penalty reform, including a moratorium on executions.
  • Public transportation, including state investment in the Public Transportation Trust Fund.

“We believe in dignity, equity and justice for all Alabamians,” Alabama Arise executive director Robyn Hyden said. “And we believe our 2020 issue priorities would break down policy barriers that keep people in poverty. We must build a more inclusive future where everyone can prosper.”

Why Alabama should untax groceries

The state grocery tax is particularly harmful for Alabamians who struggle to make ends meet. The tax adds hundreds of dollars a year to the cost of a basic necessity. And most states have abandoned it: Alabama is one of only three states with no sales tax break on groceries.

Alabama is also one of only three states with a full income tax deduction for federal income taxes (FIT). For those who earn $30,000 a year, the deduction saves them about $27 on average. But for the top 1% of taxpayers, the FIT break is worth an average of more than $11,000 a year. Ending the FIT deduction would allow Alabama to remove the sales tax on groceries and still have funding left over to address other critical needs.

The grocery tax and FIT deduction are two key factors behind Alabama’s upside-down tax system. On average, Alabamians with low and moderate incomes must pay twice as much of what they make in state and local taxes as the richest households do.

“By untaxing groceries and ending the FIT deduction, lawmakers can make Alabama’s tax system more equitable for everyone,” Hyden said. “They can strengthen state support for K-12 and higher education. And they can make it easier for struggling families to put food on the table. This is an opportunity to make life better for everyone in our state, and the Legislature should do it.”

Learn more about Arise’s 2020 issue proposals

Grassroots democracy will be on display when Alabama Arise members choose our 2020 issue priorities at our annual meeting Sept. 7 in Montgomery.

The following proposals will be up for a vote for our 2020 legislative agenda.

Below, you’ll find member groups’ summaries of their new and modified proposals. And you’ll find our policy staff’s overviews of the current issue priorities and our two permanent priorities: tax reform and adequate state budgets. We hope to see you in September as we gather to renew our shared commitment to building a better Alabama for all!

New issue proposal

Housing Trust Fund revenue

Submitted by Gordon Sullivan, Low Income Housing Coalition of Alabama (LIHCA)

LIHCA thanks Alabama Arise and its members for supporting the Housing Trust Fund in 2018 and previous years. Our combined efforts resulted in social and political momentum to secure dedicated revenue for the Alabama Housing Trust Fund (AHTF)! We are here to ask for your continued support of the AHTF and help in securing dedicated revenue for the fund in 2020.

We believe safe, decent and affordable housing is a basic human right. Hard-working Alabamians should be able to pay rent and still be able to put food on the table. Unfortunately for many Alabamians, finding a safe and affordable home is only a dream. Alabama is in a housing crisis, with a lack of nearly 70,000 rental homes for folks surviving on minimum wage and fixed incomes.

Folks making minimum wage have to work 82 hours a week to afford a market-rate two-bedroom apartment. By doing so, they miss out on family suppers and Little League, because there simply aren’t enough hours in the day. Every child deserves a safe place to call home and a chance to have those who love them help with homework and read bedtime stories.

The AHTF created a fund to construct, rehabilitate and maintain homes for low-income households. Though the AHTF was created in 2012, it was enabling legislation and did not come with funding. That means we can’t create any new or rehabilitate any existing homes or address housing problems related to natural disasters. That is why LIHCA will seek dedicated revenue for the AHTF in 2020.

Proposed legislation to fund the AHTF

The bill, sponsored by Rep. Neil Rafferty, D-Birmingham, would increase the mortgage record tax from 15 cents to 20 cents for every $100 of a mortgage. This would put approximately $15 million per year in the AHTF. This type of revenue is a common funding source for housing trust funds across the country. In Alabama, this tax has not been increased since it was enacted in 1935.

We know that two-thirds of Alabamians (67%) see the lack of affordability as a problem in our state and that a strong majority (63%) of Alabamians are ready for state action to increase housing opportunities for households priced out of the market. Building on the momentum of previous years, we believe attaining bipartisan co-sponsors and endorsements from influential groups throughout the state is possible in 2020.

With the creation of new affordable homes in Alabama, families will begin to achieve economic stability. Communities will reduce blight. And the state will see an economic impact of nearly $1 billion over 10 years.

The dedicated revenue bill supports Arise’s values and its membership’s vision for addressing poverty in Alabama by investing in communities and helping low-income households access safe and affordable homes. The dedicated revenue bill will provide $15 million per year to create and rehabilitate homes for those in need. We have been successful in building momentum with Arise’s support in past years. Let’s work together to finish what we started!

Modified issue proposal

Voting rights

Submitted by Scott Douglas and Tari Williams, Greater Birmingham Ministries, and Ned Freeman, Birmingham Friends Meeting (Quakers)

Let’s build on Arise’s commitment to voting rights, continuing to prioritize automatic voter registration (AVR) and focusing on restoration of voting rights for Alabamians affected by felony disenfranchisement. Under AVR, Alabamians would be registered to vote by default, without having to register themselves, because the state already has the necessary information. And restoring voting rights for everyone would affirm basic ideals of democracy.

Historically, Alabama has been a leader among states with the most severely punitive disenfranchisement laws. These laws, with their blatantly racist history, have kept African Americans from the polls in enormous – and enormously disproportionate – numbers. Of the more than 280,000 disenfranchised felons in Alabama, nearly 150,000 are black, according to the Sentencing Project. That means that disenfranchised felons make up more than 15% of the state’s voting-age African American population.

Alabama’s felony disenfranchisement policies have disparate impact on individuals convicted of felonies who are poor, black or both. Therefore, we propose the introduction of legislation that will (a) remove the financial barrier of requiring payment of all fines, fees and/or restitution and (b) restore voting rights to individuals while on probation and parole. This legislation is not cost-prohibitive, may take one to three years to pass because of upcoming elections and is not potentially divisive for Arise members.

Alabama’s disenfranchisement laws have fostered an underclass of tens of thousands of people who are unable to vote because they do not have enough money. In 1964, the 24th Amendment abolished the poll tax, but to this day in Alabama, money keeps a disproportionate number of people away from the ballot box. People should not be barred from voting solely because they are unable to pay back their fines, fees and restitution.

Restoring voting rights to rebuild community ties

If we truly want people convicted of felonies to re-engage with society, become rehabilitated and feel a part of a broader community (thus creating incentives not to recidivate), then our state should do everything possible to reincorporate these individuals into mainstream society. In terms of being a just and even-handed society, it is not fair if thousands of people are unable to regain their voting rights because they are poor. People who are wealthy or have access to money are able to repay their financial debts. But poor people (the vast majority of people who have felony convictions) are not. This is an unjust system.

Individuals on probation and/or parole are actively working on retaining and/or rebuilding their ties to their families, employers and communities. Allowing them to reestablish ties as stakeholders in political life provides an analogous and important reintegrative purpose and promotes public safety.

Felony disenfranchisement provisions, especially in the South and particularly in Alabama, date back to the post-Reconstruction era. Their intent was always clear and explicit: to disenfranchise African Americans and preserve white domination.

Restoring voting rights and automatically registering voters is good policy. Arise prioritizing these policies also has the immediate benefit of putting a positive voting rights agenda in the public debate during an era when voting has been under attack.

Current Arise issue priorities

Criminal justice debt reform

Court fees and fines impose heavy burdens on many struggling families. Driver’s license suspensions over unpaid fines can cause Alabamians with low incomes to lose their jobs. Cash bail for minor offenses can imperil families’ economic security. And multiple fees can stack up, making it impossible to move on from a conviction because consequences never end. In Alabama, people are subject to 63 separate fees in the criminal justice system – including even a $1 fee for paying fee installments.

This year, Arise emphasized reforming civil asset forfeiture within the umbrella of criminal justice debt. This practice allows police to seize cash or other assets if they find probable cause to link the property to a crime. But the process doesn’t require a criminal conviction, or even a charge.

Originally intended to fight drug kingpins, civil asset forfeiture today sees heavy use against people accused of minor crimes. Underfunded law enforcement agencies have incentives to use forfeiture because they are often able to keep much of the seized property.

A philosophically diverse coalition is seeking to end forfeiture abuses in Alabama, and reform efforts already have borne fruit. In 2019, comprehensive reform efforts moved quickly at first but then slowed amid law enforcement opposition. Eventually, the Legislature passed incremental reform, mandating public reporting of property seizures. Public opinion strongly favors further change, and momentum continues to build.

Death penalty reform

Alabama’s capital punishment system is unreliable and racist. Our state hands down nearly double the national average of death sentences. We are the only state with no state-funded program providing legal aid to death row prisoners. And state laws give insufficient protection against executing people who were mentally incapable of understanding their actions.

Arise has worked for increased transparency on the lethal injection procedures and a three-year moratorium on executions. Bills were introduced but did not move in recent years. In 2017, the Legislature voted overwhelmingly to bar judges from imposing death sentences when a jury recommends life without parole. But the judicial override ban is not retroactive. About a fifth of the 175 people on Alabama’s death row received death sentences against the jury’s recommendation. We would like to enforce the override ban retroactively.

Alabama’s death penalty practices reflect deep racial inequities. Before the 2017 ban, judges imposed death against a jury’s determination more often when victims were white. The state argued as recently as 2016 that it should be allowed to kill a prisoner even when a judge explicitly cited race at the sentencing hearing. Much work remains to modernize Alabama’s justice system and prevent erroneous executions.

Payday and title lending reform

Every year, high-interest loans trap thousands of struggling Alabamians in a cycle of deep debt. Payday loans are short-term (usually two-week) loans charging high annual percentage rates (APRs), up to 456%. Auto title loans charge up to 300% APR and also carry the risk of repossession of the family vehicle.

These high-cost loans strip wealth from borrowers and hurt communities across Alabama. Payday lenders are on track to pull more than $1 billion in fees out of Alabama communities over the next decade, with most of that money flowing to out-of-state companies. Predatory lending practices disproportionately target people of color and exacerbate the economic challenges in struggling rural and urban communities.

Arise is part of a statewide coalition promoting interest rate caps on payday and title loans. In 2019, we supported legislation to give payday borrowers a 30-day repayment period – the same as other monthly bills – up from as few as 10 days now. But the bill didn’t move, despite the Senate Banking Committee chairman’s assurances that he would allow a vote.

The 30 Days to Pay bill’s sponsor – Sen. Arthur Orr, R-Decatur – is working to ensure it will receive consideration early in the 2020 regular session. Heavy citizen engagement will be needed to overcome the lending lobby.

Public transportation

Our state’s jumble of local transportation systems fails to meet the needs of many people in rural, suburban and urban areas. Alabama is one of just five states with no state public transportation funding. For many low-income workers, seniors and people with disabilities, the transit gap is a barrier to daily living. Many folks can’t get to work, school, the doctor’s office or other places they need to go in a reasonable amount of time.

Alabama took a good first step in 2018 by creating a state Public Transportation Trust Fund. But the law did not allocate any state money, even though it would be a high-return investment in our future. Each $1 million invested in public transportation creates 41 full-time jobs, research shows. Those jobs would fuel economic growth and improve quality of life in our communities.

Appropriations for the state trust fund would be eligible for a 4-to-1 federal match. So by not funding public transit, Alabama leaves millions of federal dollars on the table each year.

The General Fund remains a key potential source for state public transit funding. Greater Birmingham Ministries’ Economic Justice/Systems Change group also has urged Arise to support legislation in 2020 to allow Alabamians to dedicate part of their state income tax refund to public transit. The state already allows voluntary contributions for mental health care, foster care and other public services.

Compiled by Dev Wakeley, policy analyst

Permanent Arise issue priorities

Adequate state budgets

Our state’s upside-down tax system starves state budgets of money needed to invest in our shared future. Alabama provides almost no state money for child care. In-home services for parents of at-risk children receive a paltry $3 million a year, far less than other states. And young adults struggle to afford rising tuition and fees at universities and two-year colleges.

Alabama must address comprehensive sentencing and prison reform in 2020. The General Fund budget will need more revenue to pay for stronger investments in mental health care, substance use treatment, drug courts, community corrections and more corrections officers.

Arise’s health care advocacy has three main goals: defend, reform and expand Medicaid. Our defense work this year focused on Alabama’s pending plan to impose a catch-22 work penalty, which would strip Medicaid from thousands of parents with extremely low incomes. Looking ahead, we expect a new push to cut Medicaid by block-granting federal Medicaid funds to states.

We’ve seen progress on Medicaid reform. The statewide Integrated Care Network (ICN) for long-term care launched last October. And the long-delayed regional primary care reform takes effect this October. Arise has recruited consumer representatives for the ICN governing board and all seven Alabama Coordinated Health Network (ACHN) boards. Next year, we’ll push for the next step: Medicaid expansion, which would benefit more than 340,000 Alabama adults.

Tax reform

Alabama’s tax system is upside down. The rich get huge tax breaks, while the heaviest tax burden falls on people with low and moderate incomes. High, regressive sales taxes on groceries and other necessities drive this imbalance. So does the state’s deduction for federal income taxes (FIT), a skewed break that overwhelmingly benefits wealthy people.

Arise has fought to end the grocery tax for more than a decade. The central challenge is how to replace the $480 million it raises for education. In 2020, we’ll intensify our efforts to show legislators the powerful link between untaxing groceries and ending the FIT deduction.

Alabama is one of only three states where filers can deduct all federal income tax payments from state income taxes. This tax break disproportionately benefits wealthy people, who pay more in federal income taxes and are more likely to itemize. Ending the FIT deduction would bring in enough revenue to untax groceries, fund Medicaid expansion and meet other critical needs.

Compiled by Jim Carnes, policy director, and Carol Gundlach, policy analyst

The 2019 session that was, and the one yet to come

Alabama legislators ended their 2019 regular session last week. But they’re not done yet.

Amid the threat of federal intervention, the Legislature likely will hold a special session this fall to address horrendous conditions in our state’s overcrowded prisons. This summer, Arise will continue making the case that meaningful prison reform must include Medicaid expansion. This move would cut state health care costs and help former inmates stay healthy and productive after release. And it would help people stay out of prison by strengthening treatment for mental illness and substance use disorders.

Arise will renew our call to fund these needed investments by fixing Alabama’s upside-down tax system. With high sales taxes and big tax breaks for rich people, this broken system is the worst of both worlds. It pushes struggling families deeper into poverty, and it doesn’t bring in enough money to provide adequate funding for corrections and other vital services. Untaxing groceries and ending the state’s deduction for federal income taxes would be two huge steps to undo that damage.

Breakthroughs on civil asset forfeiture, voting rights

Arise members’ advocacy led to progress on civil asset forfeiture and voting rights this year. Lawmakers voted unanimously for SB 191, sponsored by Sen. Arthur Orr, R-Decatur, which will increase transparency around forfeitures in Alabama. And they approved SB 301, sponsored by Sen. Rodger Smitherman, D-Birmingham, which will expand access to absentee ballots.

Our supporters were key in stopping numerous proposals to erect harmful new barriers to Medicaid and food assistance under the Supplemental Nutrition Assistance Program (SNAP). We also saw major breakthroughs on several recent Arise issue priorities and endorsements:

  • HB 225, sponsored by Rep. Adline Clarke, D-Mobile, will forbid pay discrimination based on race or sex.
  • SB 30, sponsored by Sen. Cam Ward, R-Alabaster, will ensure that inability to pay filing fees won’t block low-income Alabamians from pursuing their rights in court.
  • SB 228, sponsored by Orr, will increase jail food funding and prevent sheriffs from pocketing any leftover money.

Two other topics dominated the headlines at the State House this year. Legislators moved quickly to pass an abortion ban that is certain to face a lengthy, expensive court challenge. They also hustled to pass a 10-cent gas tax increase for infrastructure improvements during a special session in March.

The work that remains undone

But lawmakers showed much less urgency when it came to investments in human services. While Alabama’s funding for K-12 and higher education is increasing, it’s still well below 2008 levels. Similarly, General Fund (GF) revenues are rising. But it’s not nearly enough to reverse decades of underinvestment in Medicaid, mental health care, child care and other services.

The Legislature also waited until the session’s final week before finally deciding the GF, rather than the education budget, would pay for the state’s share of the Children’s Health Insurance Program. CHIP supports coverage for more than 170,000 Alabama kids.

Some climbs remain steeper than others. Reforms of payday lending and the death penalty struggled to gain traction this year. So did proposals for automatic voter registration and early voting. But Arise members – unafraid and undeterred – will keep working for those changes and others to promote opportunity, prosperity and justice for all Alabamians.

Not back yet: Alabama’s K-12, higher education funding still lower than 2008

Alabama children who entered first grade in 2008 will get their high school diplomas next year. And they’ll graduate from an education system that still gets less state support than it did when they were first learning how to add and subtract.

The $7.1 billion Education Trust Fund (ETF) budget that the Alabama Senate passed 28-2 Thursday contains substantial funding increases for K-12 schools, two-year colleges and four-year universities. (Read the excellent coverage from AL.com’s Trisha Powell Crain and the Montgomery Advertiser’s Brian Lyman for the full details.) The budget’s sponsor, Sen. Arthur Orr, R-Decatur, called it “the largest ETF budget in history.”

In terms of raw dollar amounts, that’s true. But it’s not the full story. To compare funding across the years on an apples-to-apples basis, you need to adjust for inflation. And adjusted for inflation, Alabama’s education funding is still much lower than it was in 2008, before the Great Recession hammered state revenues.

The math: ETF increases aren’t keeping up with inflation

Alabama allocated $6.7 billion to the ETF in 2008, which is equivalent to $7.8 billion in today’s dollars. That means the Senate’s $7.1 billion budget for next year still would be 8.6% below the ETF’s 2008 level.

The story is similar for both K-12 and higher education, both of which are on track to fall far short of their inflation-adjusted 2008 funding levels. Under the Senate budget, K-12 schools would get 6.9% less than they did in 2008, while higher education funding would be 17.2% below where it was that year.

Even so, the 2020 Senate budget would be a move in the right direction. This plan would provide $4.9 billion for K-12 schools and $1.9 billion for higher education. Those amounts would be 6.8% and 10% increases, respectively, over this year’s allocations. That is significant, praiseworthy progress toward returning to 2008 levels.

But it’s also important not to look at 2008 through rose-colored glasses. Though that budget was the ETF’s recent high-water mark, it still didn’t invest adequately in a range of important services. State officials at the time identified hundreds of millions of dollars of unmet needs in reading and math education, distance learning, need-based tuition assistance and other areas. As time has passed and inflation has continued to outpace state funding increases, Alabama’s unmet educational needs have only grown.

How Alabama can fund needed investments

Our state’s education funding isn’t an uncontrollable force of nature like the weather. Policy choices determine the amount of money that Alabama raises – or doesn’t raise – for education. And lawmakers have a range of choices to bring in more money for investments in our schools, colleges and universities.

One option would be to modernize Alabama’s income tax rates, which haven’t changed since 1935. The state’s 5% top rate kicks in starting at just $3,000 of taxable income. That means the marginal rate that multimillionaires pay is no higher than the one that applies to many families who struggle to make ends meet.

Another approach would be to close tax loopholes that disproportionately benefit large corporations and wealthy households. Alabama’s deduction for federal income taxes (FIT) is one example of that kind of skewed tax break. For those who earn $30,000 a year, the FIT deduction saves them about $27 on average. But for the top 1% of taxpayers, it’s worth an average of more than $11,000 a year.

Ending the FIT deduction would raise $719 million a year. That’s money Alabama could use to invest in education, end the state sales tax on groceries and take other steps to make life better for everyday folks.

Budget and tax decisions reflect what we value as a society. Alabama could continue to cling to a tax system that delivers lavish tax breaks to wealthy people while making it harder for struggling families to get ahead. Or our state could choose instead to prioritize stronger investments in education, health care and other services that benefit everyone.

Arise legislative recap: April 19, 2019

“The grocery tax is a tax on a basic necessity of life. It’s a tax on survival. And it’s time for Alabama to bring this tax to an end.”

Arise communications director Chris Sanders discusses a recent bill by Rep. Chris England that would be a major step forward on untaxing groceries. The video also details Arise’s plan for how Alabama could end the state grocery tax and expand Medicaid without cutting a dime from the education budget.

Removing the FIT deduction would allow Alabama to untax groceries, expand Medicaid

Alabama’s federal income tax (FIT) deduction provides a huge tax break for high-income individuals – but at what cost? $719 million to be exact.

The FIT deduction is one big reason Alabama’s tax system is upside down. For those who earn $30,000 a year, the deduction saves them about $27 on average. But for the top 1% of taxpayers, the FIT break is worth an average of more than $11,000. The higher the income, the more the FIT deduction is worth for those who can most afford to pay more to fund education, health care and other vital needs.

Only two other states offer a full FIT deduction like Alabama does. (Three other states offer a partial deduction.) Ending the FIT deduction would bring in an additional $719 million a year, the Institute on Taxation and Economic Policy estimates. That would be enough to allow Alabama to remove the state sales tax on groceries. For most people in our state, the net result would be a tax cut.

This proposal would make it easier for everyday Alabamians to make ends meet, but its benefits wouldn’t end there. Alabama also could use the new revenue to expand Medicaid, ensure full funding for the Children’s Health Insurance Program (CHIP) in 2021 and make critical investments in education and other areas. CHIP supports health coverage for more than 170,000 children through Medicaid and ALL Kids.

Alabama’s constitution dedicates income tax revenue to education, and the FIT deduction is written into the document as well. So this plan would require the Legislature and the public to approve a constitutional amendment. But ending the FIT deduction would be a good way for Alabama to begin prioritizing public investments that benefit everyone over tax breaks that primarily benefit a select few.

What we’re watching during the 2019 special session

This week brought a first in recent memory at the Alabama Legislature: a session within a session. The regular session began Tuesday, but lawmakers have put it on hold until March 19 to make way for a special session on the state gas tax.

At Gov. Kay Ivey’s call, legislators will consider a proposed 10-cent gas tax increase, to be phased in over three years. (The current tax is 18 cents per gallon.) Ivey’s plan aims to strengthen Alabama’s roads, bridges and port, which has become a mantra for state leaders in the run-up to the 2019 session.

Arise hasn’t taken a position on the gas tax proposal, but we have a lot to say about infrastructure. We’re calling on lawmakers to claim a larger vision of infrastructure as Alabama begins its third century of statehood.

Rural hospitals, for example, are key infrastructure but weren’t mentioned in the governor’s State of the State address Tuesday night. Seven rural hospitals have closed since 2011, including one in Georgiana that will close Friday. Another overlooked sector is public transportation, which receives no state funding in Alabama.

There’s a good chance we’ll see Arise issues emerge in the gas tax debate. For example, the Montgomery Advertiser on Wednesday cited a potential push for Medicaid expansion to win gas tax votes from Democratic members. Some lawmakers also have expressed interest in reducing the grocery tax to offset the effects of the gas tax hike. Wouldn’t it be amazing if a plan to rebuild roads and bridges became the first step toward helping struggling Alabama families get health coverage and make ends meet?

Why is this special session happening?

Ivey called a special session to remove a procedural hurdle for the gas tax bill. To pass in the regular session, any bills other than the Education Trust Fund and General Fund budgets must first win a three-fifths majority in both chambers in a vote called the budget isolation resolution (BIR). But in a special session, any bill included in the governor’s “call” can pass with a simple majority.

The Legislature can meet for up to 12 legislative days across 30 calendar days during a special session. But because the regular session started first, each day of the special session also will count against the 105 calendar days available for the regular session. Lawmakers can meet for up to 30 legislative days during the regular session.

How to advance our vision for Alabama’s next century

What kind of future do we want for Alabama? It’s a question worth reflecting on as our state enters its third century this year. Are we all right with limiting power and prosperity to a select few? Or would we rather build a state where everyone has a voice and where people of all races, genders and incomes have a real chance to get ahead?

Alabama Arise believes in justice and opportunity for all, and our policy priori­ties flow from that vision. It’s why we support expanding Medicaid for Alabam­ians who can’t afford coverage. It’s why we want to rebalance an upside-down tax system that taxes struggling families deeper into poverty. And it’s why we urge stronger investments in education, housing, public transportation and other services that improve quality of life and promote economic opportunity.

We expect lots of infrastructure talk at the Legislature this year. The regular session starts Tuesday, but lawmak­ers may move quickly into a special session on the gas tax. Gov. Kay Ivey has asked legislators to increase the state’s 18-cent gas tax by 10 cents over three years. That money would fund road and bridge maintenance and oth­er infrastructure improvements.

Many of Alabama’s deteriorating roads are overdue for repair. But the defi­nition of “public infrastructure” goes far beyond tar and gravel. Education, health care and public transportation also help lay the foundation for shared prosperity. This session could bring chances to strengthen those invest­ments – and to make the tax system that funds them more progressive.

Hope on grocery tax, Medicaid expansion

One key breakthrough could be on a longtime Arise priority: ending the state grocery tax. We came heartbreaking­ly close in 2008, when a bill to untax groceries passed the House and fell one vote short in the Senate. But Arise members never gave up the advocacy fight. Now legislators face renewed pressure to end or cut the state’s 4 percent sales tax on groceries. (Some conservative lawmakers are urging a grocery tax reduction to accompany a gas tax increase.) Alabama is one of only three states with no tax break on groceries. It’s a highly regressive tax on a basic necessity, hitting hardest on people who struggle to make ends meet.

Pressure also is building for Alabama to expand Medicaid to cover more than 340,000 adults with low incomes. Medicaid expansion would save hun­dreds of lives annually and create a healthier, more productive workforce. It also would help save rural hospitals, support thousands of jobs and pump hundreds of millions of dollars into the economy.

Our work for a brighter, more inclu­sive future won’t end there. We’ll keep pushing for stronger consumer protec­tions against high-cost payday loans. We’ll make the case for the state to fund public transportation and remove barriers to voter registration. And we’ll continue seeking an end to injustices in Alabama’s civil asset forfeiture and death penalty systems. Visit our website and follow us on Facebook and Twitter for updates on these issues throughout the year.