Other Issues - Tax Reform

LWVAL Action Priority Level III - Issues identified by LWVAL Advocacy Committee and/or State Board or Local Leagues.

Click a bill to see sponsor(s), summary (including link to full text), League action and justification for that action, and progress of the bill through the legislative process.

thumbs_up_icon.jpg = LWVAL's support for the legislation.
thumbs_down_icon.jpg = LWVAL's opposition to the legislation.
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LWVAL has taken a position on these bills:
[none at this time]
LWVAL is monitoring this bill:

HB202 - State income tax, federal deduction limited for individual taxpayers, state sales tax on food removed, Amendment 225 (Section 211.04, Recompiled Constitution of Alabama of 1901, as amended), repealed, const. amend.

Sponsor(s): Representatives Knight, Warren, England, Forte, Melton, McClammy, Boyd, Grimsley, Jackson, Newton (D), Buskey, Howard, Moore (M), Rogers, Scott, McAdory, Hall, Givan, Coleman-Evans and Todd

Summary/Synopsis: Constitutional Amendment.
This bill would propose an amendment to the Constitution of Alabama of 1901, to repeal Amendment 225 of the Constitution of Alabama of 1901, now appearing as Section 211.04 of the Official Recompilation of the Constitution of Alabama of 1901, as amended; and to exempt sales of food and over-the-counter drugs. Local governments shall continue to collect sales taxes on food and over-the-counter drugs at the same rate collected for the local portion of the retail sales tax. The legislation defines food and over the counter drugs.

Upon legislative passage the amendment would be placed on the ballot “at the next statewide primary, general or special election held for that purpose.” The exemption for the sales tax would go into effect on September 1, 2013.

Amendment 225 would be repealed on passage of the amendment. It reads: “In computing net income for state income tax purposes for the calendar year 1965 and each year thereafter, a resident individual taxpayer shall be allowed to deduct from his gross income the amount of federal income tax paid or accrued within the taxable year. A nonresident individual income taxpayer shall be allowed to deduct only that amount of federal income tax paid or accrued in the taxable year on income received from sources within the state.”

League Action and Justification: LWVAL is monitoring HB202 for movement. This legislation in various forms has been introduced in the past several years and has not moved.

LWVAL believes the state’s system of taxation should be broad, equitable and efficient for the taxpayers of the state. It supports the removal of the sales tax on food. It has no position on applying the tax to nonprescription drugs, but support for this action is consistent with its support for making the tax system less reliant on regressive taxes such as the sales tax.

League positions also support taking tax policy out of the Alabama Constitution. The sales tax actions fail on this point.

Repeal of Amendment 225 would increase revenues to the state but since no Fiscal Note is generally created until legislation moves, the amounts that would be generated are not yet calculated nor are the amounts lost to the sales tax exemption. Upper income taxpayers benefit most from using federal income tax payments as deductions on their state tax returns.

Progress in the Legislature:
02/07/2013 – First Reading and referred to the

SB279 - State sales and use tax increased, phase-in period, sales and use tax on food phased out, exempt by 2007, counties and municipalities prohibited from increasing sales tax on food, Secs. 40-23-2, 40-23-61 am'd.

Sponsor(s): Senators Dial and Whatley

Summary/Synopsis: Under existing law, the state imposes sales or use taxes upon certain persons, firms, or corporations. Sales of certain items are taxed at a reduced rate. Sales of other items are exempt from the taxes. This bill would:
  1. Increase the state sales and use tax general rate to four and one-quarter percent on September 1, 2013, to four and one-half percent on September 1, 2014, to four and three-quarters percent on September 1, 2015, and to five percent on September 1, 2016.
  2. Phase out the state sales and use taxes on food over a four-year period by reducing the rates by one percentage point per year beginning September 1, 2013.
  3. Exempt sales of food from the sales and use taxes beginning September 1, 2016.

League Action and Justification: LWVAL is monitoring SB279.
League supports the elimination of the sales tax on food; however, the fiscal impacts of this legislation are not yet available.

Bill Progress in the Legislature:
02/28/2013: First Reading and referred to the
04/18/2013: 3rd Reading and place on the calendar; pending 3rd Reading and favorable from F&T-E.

04/25/2013: 3rd Reading Carried Over; Marsh motion to Carry Over adopted by Voice Vote; Further Consideration.

05/07/13: Indefinitely postponed in house of origin.

NOTE: The fiscal note for the bill indicates: “Based on information obtained from the Department of Revenue for fiscal year 2012, each one percent reduction of the state sales and use tax on food would reduce receipts by an estimated $74.5 million each year and each one-quarter percent increase of the general sales and use tax rate on other items would increase receipts by an estimated $91.9 million annually which would net an estimated increase in sales and use tax receipts of $17.4 million annually until the rate adjustment is fully implemented. For each year thereafter, this bill will result in an estimated $70 million net increase in sales tax receipts.” annually.

The bill does not remove the long list of nonfood items exempted from the sales and use taxes.

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