Tax Reform Archives - Alabama Arise

This is the moment: It’s time for Alabama to untax groceries

By Chris SandersApril 28, 2023June 1, 2023

Sen. Andrew Jones, R-Centre, filed legislation Thursday to reduce Alabama’s state sales tax on groceries. Jones’ SB 257 is co-sponsored by all 35 state senators. Alabama Arise executive director Robyn Hyden released the following statement Friday in response:

“Alabama Arise is thrilled to see widespread, bipartisan support from every senator for reducing the state sales tax on groceries. We support Sen. Andrew Jones’ legislation and appreciate the leadership that he and Rep. Penni McClammy have shown on this issue. It’s time for lawmakers to seize this opportunity to untax groceries and improve life for every Alabamian.

Sen. Andrew Jones, R-Centre, briefs Alabama Arise Action supporters about his efforts to untax groceries during Arise’s Legislative Day on April 11, 2023, in Montgomery.

“Reducing and ultimately eliminating the state grocery tax would make it easier for families to make ends meet. It would remove Alabama from the shameful list of three states with no tax break on groceries. It also would be an important step toward righting the wrongs of our state’s upside-down tax system.

“Alabamians with low and moderate incomes pay a higher share of their incomes in state and local taxes than the wealthiest households, and high sales taxes – particularly on food – are a major reason why. Quite simply, there are better ways for Alabama to raise revenue than taxing a necessity of life.

Alabama Arise supporters gather outside the State House in Montgomery during Arise’s Legislative Day on April 11, 2023. More than 100 Alabamians came to urge their lawmakers to end the state sales tax on groceries.

“It will be important, however, to ensure any grocery tax cut doesn’t harm our children’s education in the long term. The state grocery tax brings in more than $600 million a year for the Education Trust Fund. That’s about 7% of this year’s total ETF budget, making it a significant funding source for public schools.

“Revenues are likely strong enough for now to reduce the state grocery tax without causing severe harm to education funding. But history tells us that good economic times won’t last forever. Lawmakers should use the coming months to identify and agree to a lasting solution to replace the state grocery tax.

Sen. Merika Coleman, D-Pleasant Grove, advocates for her plan to untax groceries during Arise’s Legislative Day on April 11, 2023, in Montgomery.

“Arise is open to numerous ideas for replacement revenue. We continue to support Sen. Merika Coleman’s proposal to untax groceries and end the state income tax deduction for federal income tax payments. Alabama is the only state to allow this full deduction, which overwhelmingly benefits wealthy households. Closing this skewed loophole would protect funding for public schools and ensure Alabama can afford to end the state sales tax on groceries forever.

“Alabama Arise members have advocated for decades to end the state grocery tax, and the people of Alabama strongly support this effort. The time for excuses and delays is over. It’s time for our lawmakers to untax groceries.”

Alabama Arise Action Legislative Day 2023

By Alabama AriseApril 14, 2023April 21, 2023

Arise held our 2023 Legislative Day on Tuesday, April 11. More than 100 supporters joined us in Montgomery to hear updates on our policy priorities and urge their lawmakers to untax groceries, expand Medicaid and end debt-based driver’s license suspensions. Thank you to everyone who spoke out for a better Alabama for all!

Alabama Arise members urge support for plan to untax groceries, protect funding for public schools

By Chris SandersApril 12, 2023April 28, 2023

Rep. Penni McClammy, D-Montgomery, speaks in support of untaxing groceries during Arise’s Legislative Day on April 11, 2023, in Montgomery.

Alabama should embrace the opportunity this year to remove the state sales tax on groceries in a sustainable and meaningful way, Alabama Arise Action members told lawmakers Tuesday.

More than 100 Arise supporters gathered for a news conference outside the State House in Montgomery to show their support for this change. State Sen. Merika Coleman, D-Pleasant Grove, and Rep. Penni McClammy, D-Montgomery, both spoke there Tuesday in support of untaxing groceries.

“We’re here today to ask our lawmakers to end the state grocery tax quickly and responsibly,” Alabama Arise Action board president Kathy Vincent said. “This is the year to finally untax groceries once and for all.”

The news conference was part of Arise’s annual Legislative Day event. Photos from the event are available on Arise’s Facebook page.

Alabama Arise Action supporters gather outside the State House in Montgomery during Arise’s Legislative Day on April 11, 2023. More than 100 Alabamians came to urge their lawmakers to end the state sales tax on groceries.

Why and how to end the state grocery tax in Alabama

Alabama is one of only three states, along with Mississippi and South Dakota, with no tax break on groceries. And Alabama is the only state to allow a full state income tax deduction for federal income tax (FIT) payments. Because wealthy people pay more in federal income taxes on average, the state’s FIT deduction overwhelmingly benefits rich households.

“We call this the FIT, or FIT deduction, and it should give you a fit,” Coleman said. “You should have a fit, because it’s an unfair tax break that disproportionately lowers taxes for the wealthiest people.”

Coleman said she will introduce a bill to repeal the state’s 4% sales tax on groceries and replace the revenue by ending the FIT deduction. Her plan would allow Alabama to end the state grocery tax while fully protecting funding for public schools.

The state sales tax on groceries brings in about $600 million a year for the Education Trust Fund (ETF). Meanwhile, the FIT deduction costs the ETF more than $900 million a year, estimates show. Revenue from both the sales tax and individual income tax go to the ETF.

McClammy and Sen. Andrew Jones, R-Centre, are preparing other bills to reduce the state grocery tax. They have not yet publicly revealed the details of that legislation.

McClammy said Tuesday that she hopes to file her bill as soon as next week. After more than 20 years of debate about untaxing groceries in Alabama, it needs to happen this year, she said.

“I hope and I pray that next year, when we come back here again, it’s not Groundhog Day,” McClammy said. “A change has got to come.”

Broad public support for untaxing groceries in Alabama

Arise shared its principles for an ideal plan to untax groceries Tuesday. Those principles call for an immediate grocery tax reduction that protects funding for public schools. They also include a grocery tax cut that applies to a broad range of foods, not a limited subset. Arise’s preferred legislation would untax food as defined in the federal Supplemental Nutrition Assistance Program (SNAP).

Public support to untax groceries is strong across Alabama. Seven in 10 Alabamians support ending the state grocery tax, according to a new poll released this week. And nearly three in five Alabamians support removing the state grocery tax while protecting education funding, according to a poll commissioned by Alabama Arise last year.

“Get rid of this grocery tax now. That is the message, loud and clear,” Alabama Arise Action executive director Robyn Hyden said. “Everybody wants this to pass. We don’t want any more excuses.”

What would an ideal plan to untax groceries in Alabama look like?

By Alabama AriseApril 10, 2023April 10, 2023

Several tax bills (including grocery tax cut bills) will be discussed this year in the Alabama Legislature. What makes a tax reform bill good for Alabamians? Here are four important factors to keep in mind:

It provides a tax cut for families with low incomes (not just wealthy households).

Alabama’s state sales tax on groceries is a cruel tax on survival. It increases hunger rates, drives struggling families deeper into poverty and adds pressure to household budgets with every trip to the grocery store.

The average Alabama family spends approximately $600 a year on state grocery tax. By reducing or eliminating the state grocery tax, we are taking an important first step toward making it easier for working families to make ends meet.

It protects education revenue to ensure our children’s classrooms are adequately funded in the years to come.

Revenue from Alabama’s individual income tax and sales tax (including the grocery tax) goes to the Education Trust Fund, which supports public education throughout the state.

Lawmakers should ensure their proposals to untax groceries protect funding for public schools while making life better for families across our state. We can and should do both.

It is broad enough to have a meaningful and long-lasting impact.

It is important that any bill to reduce the grocery tax allows SNAP-eligible foods (rather than only WIC-eligible foods) to be untaxed.

If only WIC-eligible foods are untaxed, grocers would have a hard time implementing the bill. Families would be confused when grocery shopping, as relatively few items would be untaxed, while most would not be.

The reduction should be sustainable in the long term, rather than just being a temporary fix.

An ideal grocery tax proposal will do all the things on this list while eliminating the state’s entire 4-cent grocery tax, rather than just a fraction of it.

It provides an immediate grocery tax reduction.

As prices continue to rise on many of the essentials that folks need to survive, families across Alabama are struggling now.

We need to help Alabamians at a time when they need a grocery tax reduction the most, rather than putting it off until future years.

Arise legislative update: March 27, 2023

By Matt OkarmusMarch 27, 2023April 21, 2023

Arise’s Pres Harris invites you to our Legislative Day on April 11 in Montgomery. Legislative Day is an annual opportunity for Arise supporters to meet their lawmakers and make the case for policy changes to improve life for every Alabamian. We expect this year’s advocacy to focus on expanding Medicaid, untaxing groceries and funding public transportation.

Arise legislative update: March 6, 2023

By Alabama AriseMarch 6, 2023March 6, 2023

Before the Alabama Legislature returns this week, Arise’s Akiesha Anderson welcomes everyone with an update on an upcoming special session on federal American Rescue Plan Act funds and an overview of Arise’s member-chosen policy priorities for 2023.

Fresh opportunities to push for a better Alabama

By Akiesha AndersonMarch 6, 2023March 6, 2023

The Alabama Legislature will welcome 37 new lawmakers to its halls when its 2023 regular session begins March 7. Alabama Arise sees this as an opportunity to educate new legislators and identify new allies on issues of importance to our members. We urge folks to join us in calling for change, including at Arise Legislative Day on April 11.

Eliminate the state grocery tax

In early February, 11% of Alabama households said they sometimes or often didn’t have enough food to eat. And those hunger challenges are even more severe in communities of color. More than 23% of Black Alabamians and 13.6% of Hispanic Alabamians said they sometimes or often didn’t have enough food.

Untaxing groceries would help families across Alabama keep food on the table. As we have for more than two decades, Arise once again will support bills this year to remove the state’s 4% sales tax on groceries. We also will support replacing the grocery tax revenue by limiting or ending a tax loophole for the wealthiest households. This legislation by Sen. Andrew Jones, R-Centre, and Rep. Penni McClammy, D-Montgomery, would empower Alabama to untax groceries while protecting funding for public schools.

Expand Medicaid to close the health coverage gap

For nearly a decade, Alabama has been outside looking in on a good deal. While hundreds of thousands of Alabamians continue to struggle without health insurance, state leaders have failed to expand Medicaid. Alabama is one of just 11 states that has yet to expand Medicaid. And that inaction has left more than 220,000 Alabamians in a health coverage gap.

Fifteen rural hospitals in Alabama are at imminent risk of closing this year if state leaders don’t act soon to protect health care access. Gov. Kay Ivey should act swiftly to expand Medicaid herself, but the Legislature’s support also will be vital. Arise will keep working to educate lawmakers and the public on the economic, budgetary and humanitarian benefits of Medicaid expansion.

Take bold steps to reform our criminal justice system

Legislators have an opportunity and an obligation to make strides in solving the many problems within Alabama’s criminal justice system. This issue has added urgency as Alabama faces a U.S. Department of Justice lawsuit alleging unconstitutional prison conditions.

Many avenues for progress exist. Arise will urge lawmakers to end the practice of suspending driver’s licenses for debt-based reasons. We will advocate for reform of the state “three-strikes” law, known as the Habitual Felony Offender Act. And we will support a bill to require the jury to be unanimous before imposing the death penalty.

Address housing and transportation needs

State House insiders expect the Legislature to go into a special session this spring to decide how to use remaining federal funds under the American Rescue Plan Act (ARPA). From the start, Arise has taken the position that Alabama should use some of its ARPA funds to jump-start public transportation and help thousands find an affordable place to call home.

During the probable special session, we will continue to uplift the need for these investments in the people of Alabama. Learn more at alarise.org/arpatoolkit.

Budget priorities for the people

By Robyn HydenMarch 6, 2023March 6, 2023

Two weeks before the Alabama Legislature’s 2023 regular session, lawmakers, lobbyists and advocates packed into the State House in late February for the annual joint legislative budget hearings. One might call it the Super Bowl for budget nerds.

After years of scarcity, both Alabama budgets are starting out with a revenue surplus. There’s $351 million in “excess” revenue for the General Fund, and $2.7 billion for the Education Trust Fund. That’s not even counting the remaining $1.1 billion in American Rescue Plan Act (ARPA) funds still awaiting allocation.

What we heard at this year’s budget hearings was not surprising. Public services like education, health care, mental health and supportive services need more resources after years of underinvestment. State agencies are struggling with worker shortages and the consequences of underfunding – and understaffing – critical programs. It’s no surprise that lawmakers heard a long, detailed list of opportunities to meet these needs. Most agency heads were clear that new funding can’t fix all of the problems – but it’s a start.

Some lawmakers have floated the idea that this one-time surplus is a sign we need a tax rebate. If that proposal materializes, Arise will be front and center advocating for funds to go directly to low- and moderate-income households bearing the brunt of higher costs. But Arise’s proposal, which comes directly from listening to our members, is a longer-term solution to our upside-down tax code. Our bill to untax groceries would help families keep food on the table while also protecting funding for public schools. It’s a solution that goes beyond just one year to create more foundational and sustainable change.

One concern you may have heard is that nobody has enough workers. Too many Alabamians are still disconnected from the workforce due to missing critical infrastructure investments in child care, public transportation, health care and affordable housing. This year, we’ll be pushing for investments in these supports to help people get and keep work, and to build the healthy and educated workforce Alabama needs.

Our 2023 policy proposals provide that roadmap for change. Expand Medicaid to ensure nobody has to die for lack of preventive care or live in poverty because they have a chronic health condition. Invest in infrastructure to support workers, including child care, housing, public transportation and education. Stop funding public services with punitive fines and fees, and start ensuring the wealthiest Alabamians pay their fair share.

We look forward to seeing you all at our Legislative Day this April. If we continue to stand and work together, we will make significant progress for Alabama.

End of emergency SNAP allotments will increase hunger in Alabama

By Carol GundlachFebruary 13, 2023March 23, 2023

For many of us, the first months of the COVID-19 pandemic disrupted nearly all of normal life. Businesses closed, either temporarily or permanently. People lost jobs and income. Children were not attending school in person. And millions of Americans were suddenly facing an unexpected problem: hunger.

Temporary increases to Supplemental Nutrition Assistance Program (SNAP) benefits helped ease that suffering for families across Alabama and nationwide. But those benefits will expire at the end of February, and that means hunger is likely to get worse again. As the end of the official federal pandemic emergency declaration approaches, Alabama families receiving SNAP benefits are facing a benefit decrease that will cut their food assistance significantly.

State and local officials can’t stop the expiration of these temporary SNAP benefits. But they can and should act in other ways to help Alabama families deal with higher food costs. School districts should expand access to free school meals. The state should fund a program that makes fruits and vegetables more readily available for SNAP participants. And legislators should untax groceries to make it easier for every Alabamian to keep food on the table.

The pandemic put a spotlight on hunger

By mid-2020, 12% of Alabama families said they sometimes or often didn’t have enough food to eat, according to the Census Bureau. And those hunger challenges were more severe in communities of color early in the pandemic. Nearly 19% of Hispanic Alabamians and 21% of Black Alabamians said they didn’t have enough food. Enrollment for SNAP food assistance rose to record levels, but that wasn’t enough to solve the sudden and severe hunger crisis.

In response, Congress and the U.S. Department of Agriculture approved emergency food assistance benefits for both child nutrition programs and SNAP. One of the most important improvements was SNAP emergency allotments.

This policy raised SNAP benefits for eligible participants to the maximum allowed as long as state and federal emergency declarations existed. In 2021, emergency allotments were revised to ensure all SNAP households received at least an additional $95 a month in emergency food assistance.

Those increases are about to expire, though. Congress passed a budget in December that will end SNAP emergency benefits in February 2023.

What happens now

The Alabama Department of Human Resources has begun sending letters to SNAP participants telling them the extra benefits will stop after Feb. 28. Nearly 400,000 Alabama households will see average cuts to their SNAP benefits of around $170 a month.

Particularly hard hit will be older adults and people with disabilities who live alone. Before the pandemic, SNAP benefits for these households were often minimal and could be as low as $16 per month. Emergency allotments boosted these folks’ benefits to the maximum of $281 per month for an individual. But with these increases ending, all of these participants will now see their food budgets decline, possibly to as little as the current minimum of $23 per month.

The loss of SNAP emergency allotments almost certainly will increase hunger, both in Alabama and nationwide. But individual participants have a few options to help reduce the financial pain:

SNAP benefits don’t have to be spent in the month in which they are received. Emergency SNAP allotments will roll over on Electronic Benefits Transfer (EBT) cards as long as the card is used at least once a month. This will allow participants to stretch their emergency dollars as far as possible.
Older adults or people with disabilities are eligible to deduct medical costs, including transportation to the doctor or pharmacy, before calculating SNAP benefits. Updating medical costs may result in more assistance than people are receiving.
All households participating in SNAP can deduct the cost of housing and dependent care. Updating housing costs and the cost of child care or care for adults with disabilities could increase SNAP benefits.
Some grocery stores and farmers markets offer extra fruits and vegetables for SNAP participants. Find out where you can get these Double Up Food Bucks.

What policymakers can do to help

Hunger is a systemic problem that requires systemic solutions. Federal, state and local officials all have roles to play in helping to reduce hunger in Alabama and the nation. Below are a few of the many policy options available.

Untax groceries

Alabama is one of only three states with no tax break on groceries. Removing the state sales tax from food would allow everyone to afford an extra two weeks’ worth of groceries. Lawmakers will introduce legislation to end the state grocery tax during the 2023 regular session, and Arise will support these bills. Join our email list for updates on these bills and alerts on how you can help end the state grocery tax.

Expand free school meals

Many local schools and districts provide free school meals for all their students. Universal free meals improve students’ health and education. They also reduce the financial burden on families struggling to make ends meet.

Eligible school districts that have not adopted the Community Eligibility Provision should work to do so. And state policymakers should remove administrative barriers for schools seeking to expand free school and summer meal programs.

Provide state funding for Double Up Food Bucks

The Double Up Food Bucks program offers extra fruit and vegetables for SNAP participants. This program promotes better health for SNAP participants and more money for Alabama’s farmers. But the absence of state dollars limits the number of stores where these extra benefits are available. Arise encourages the Legislature to provide state funding for Double Up Food Bucks in the 2024 budget year.

Strengthen SNAP in the Farm Bill

Congress must reauthorize the Farm Bill, which includes SNAP, next year. Many advocates are calling for Congress to make the emergency allotment amounts permanent, either in the Farm Bill or through other legislation. Other groups are encouraging Congress to increase all SNAP benefits to a level that better reflects the real cost of food. Sign up for Arise’s email list for action alerts and updates as we get closer to the Farm Bill reauthorization.

The federal income tax deduction is skewed and wrong for Alabama

By Carol GundlachDecember 15, 2022February 24, 2023

Wealthy people don’t need a huge, skewed income tax break ‒ but Alabama gives them exactly that. This loophole, called the federal income tax (FIT) deduction, overwhelmingly benefits rich households. It’s an imbalanced tax giveaway that reduces funding for public schools. And it increases the state’s reliance on regressive revenue sources, like the sales tax on groceries, that fall hardest on people who are striving to make ends meet.

A 1965 constitutional amendment created the loophole by allowing Alabamians to deduct federal income tax payments from their income before calculating state income taxes. This deduction doesn’t exist in most other states ‒ and for good reason! Only Alabama and Iowa allow individuals to deduct all federal income tax payments. (Louisiana had an FIT deduction until 2022.) Three other states ‒ Missouri, Montana and Oregon ‒ cap their FIT deductions at around $5,000. There, as here, the benefits go largely to those with the highest incomes.

A tax break for those who need it least

The FIT deduction primarily benefits wealthy households and does little or nothing for families with low and moderate incomes. Unlike Alabama, where the state income tax rate is nearly flat (with most people paying the same percentage of their income), the federal government taxes people at higher rates as their income goes up. This means rich people can use Alabama’s FIT deduction to exclude much more of their total income when calculating state income taxes. And that means the FIT deduction gives the biggest breaks to those who can most afford to pay to fund education, health care and other vital needs.

By contrast, the FIT deduction offers comparatively little benefit to people with low or moderate incomes. For Alabamians with incomes under $22,000, the FIT deduction is worth an average of $3 a year, the Institute on Taxation and Economic Policy (ITEP) estimates. In fact, for most people in our state, the deduction is worth less than $135 a year. But for the richest 1% in Alabama ‒ whose average income is $1.28 million ‒ the deduction is worth an average of $12,901 a year, ITEP estimates.

A path to untax groceries and support public schools

Ending or capping the FIT deduction would be an important step to improve Alabama’s upside-down tax system. And the effects for individual tax filers would be relatively modest. Even for the richest Alabamians, eliminating the FIT deduction would increase their taxes by only around 1% of total income on average. For most people in our state, the increase would be significantly less ‒ or none at all.

By ending this upside-down tax break for the rich, Alabama lawmakers could generate $833 million in new revenue. More than 85% of that amount would come from the highest-paid 20% of residents. This money would empower Alabama to end the state grocery tax without cutting a dime of funding for public schools. And after untaxing groceries, lawmakers still would have more than $300 million in new revenue every year to strengthen investments in K-12 and higher education.

Bottom line

The FIT deduction is a nearly 60-year-old bad idea. It takes money away from our children’s schools. It forces the Legislature to tax groceries and other necessities instead of income from wealthy residents. And it provides a giant tax loophole for the richest people in our state. By abandoning this failed experiment, lawmakers can help make our state more just and inclusive and build a brighter future for every Alabamian.

Issue: Tax Reform