Alabama is one of two states that fully taxes groceries and offers no type of credit for low income families to offset the burden.
Now, Birmingham City Council and Mayor William Bell are looking at ways to rebate a portion of the grocery tax back to some shoppers.
The details of the proposed rebate program are still being worked out. Council submitted a draft to the city’s law department, but an attorney sent a memo back to council outlining why the draft conflicts with Alabama state law.
The draft outlines how low income families, the elderly and those on disability can apply for a rebate. The annual rebate would range from $50 to $150 dollars, depending on family size and annual income.
Council President Johnathan Austin says while the details are going to change, the goal remains to try to ease the tax burden for low income families, the disabled and the elderly.
State lawmakers have been talking about eliminating the grocery tax for years.
“Low income families spend a greater portion of their incomes on groceries and that's why it's considered a regressive tax so doing something about the sales tax has been a favorite reform proposal in Alabama for a long time,” explained Tom Spencer with the Public Affairs Research Council of Alabama.
However, Spencer says it is estimated to cost the state $600 million to $700 million annually.
“And as you know we struggle a lot to pay the bills on government in Alabama as it is,” explained Spencer.
Now the city is trying to take action at the municipal level, with a plan that faces many challenges.
“In state law, an individual municipality cannot eliminate the sales tax on food or decide what is taxed by the sales tax,” explained Spencer. “That's part of the problem here. The state structure decides what is covered by the sales tax. So a city, this is not actually rebating the sales tax money, this is basically taking city money that is collected by all taxes and it's refunding a certain amount to citizens who apply for it.”
“It’s just a draft,” said Austin. “So the main thing we wanted to do is to see what type of latitude and flexibility we have as a municipality in establishing and passing local laws and ordinances that would in effect address the disparity between those who are at or below poverty and our seniors.”
Spencer says verification of the applicants’ information would also offer challenges.
“It does seem it would be difficult to verify the identity, the household composition, the income level of all these applicants for this program,” said Spencer.
The mayor's office says the law department is still trying to find a legal, workable way to do this.
As for how much the plan could cost the city?
“I think we as a city should cap it,” said Austin. “I believe, set it as an incentive and cap it. That could be a million dollars. It could be two million dollars.”