Camping and hunting gear, boats and boating equipment and other outdoor supplies would be exempt from state sales tax two weekends per year under House Bill 257, sponsored by Rep. Joe Lovvorn, R-Auburn.
The bill creates the “Alabama Adventure Awaits” sales tax holiday, similar to the Back-to-School Tax Holiday.
It’s one of several bills now pending in the Legislature to reduce the sales tax on certain items, or exempt them all together. Which and how many advance will be weighed against shrinking state revenues.
Lovvorn told Alabama Daily News the proposed new tax holiday came in part from findings by Innovate Alabama, a public-private partnership to support entrepreneurs and development in the state.
“When we were looking at why people want to come to Alabama and stay in Alabama, the No. 1 thing that kept coming back to us was the great recreational opportunities we have here,” Lovvorn said. “… I just started thinking about ways we could look at getting people outdoors.”
Tax-free items would include boats and ATVs, boating and water activity supplies, camping supplies, sports or recreational equipment, fishing supplies, general outdoor supplies, firearms and ammunition, gun safes and hunting supplies.
Lovvorn said the tax holiday could drive people to use state parks and be used by retailers to plan events such as boat shows and fishing and hunting expos.
“We’re trying to light a spark for more people to want to be outside,” Lovvorn, who is the House Rules Committee chairman.
Local municipalities would have the option to remove their sales taxes from the items on the first weekends in March and August each year. The holiday would end in 2027 unless extended by the Legislature.
The bill has been assigned to the House Ways and Means education budget committee and doesn’t yet have a fiscal note.
“My hope is that it would drive more revenue for the state,” Lovvorn said. “If people buy a tent this weekend, next weekend they need lanterns. And if they buy a boat, Lord knows they’ll be buying other stuff.”
Flat ETF revenues lead to caution
Lovvorn’s is one of several bills this session affecting sales tax collections on specific items.
House Bill 51, by Rep. Margie Wilcox, R-Mobile, would remove the state tax from hearing aids. Its fiscal impact is about $3.1 million per year. It passed the House last week, but not before being amended to clarify that county and city governments don’t have to exempt their local taxes.
House Bill 282, by Rep. Mark Shirey, R-Mobile, would exempt eyeglasses and contacts. It doesn’t yet have a fiscal note.
Sen. Jack Williams, R-Wilmer, has Senate Bill 6 to remove the state sales tax from livestock fencing materials and Sen. Josh Carnley, R-Ino, has Senate Bill 94 to remove state sales tax from the sale of honeybees and their products. Neither yet has a fiscal note.
A proposal by Sen. Arthur Orr, R-Decatur, and Neil Rafferty, D-Birmingham, to remove state sales tax from feminine hygiene and several baby care items such as diapers and wipes, is moving through the Legislature. It would remove about $11.2 million from state revenue each year.
Meanwhile, some significant tax credit legislation related to workforce development and participation is expected in the second half of the legislative session. Those too, at least initially, would be a dip in state revenues.
And a proposal to cap property tax increases from year to year would have an about $58 million impact on state, local and school revenues. That proposal from Rep. Philip Pettus, R-Killen, was approved in a House committee last week.
Lawmakers in the coming weeks will have to weigh the proposed cuts and credits against an Education Trust Fund in which revenues are already flat. Income and sales taxes are the largest revenue streams into the ETF. As of February, five months into the fiscal year, income tax collections were up .24% and sales tax revenue was down 3.04%, or nearly $30 million. Overall, receipts into the ETF ticked up a bit in February but are still down .45% year-over-year.
At least some of the decline in the sales tax revenue is attributable to the 1% cut last fall on the state sales tax on most grocery items.
Flat revenues were expected, Orr, chairman of the Senate Education budget committee, said recently. But they’re a reason for caution.
“Regarding tax exemptions, cuts, incentives, we have to be very careful going forward,” Orr said.
Revenues into the General Fund were up an eye-popping 34% in February, but Kirk Fulford, deputy director of the Legislative Services Agency, explained that’s because of some movements in the last year of opioid settlement funds.
“The $30.7 million in growth (in February) is misleading,” he said. “…Thankfully, this timing issue has now worked itself out and will not impact growth going forward.”
Overall, the General Fund is up about 12%.
“Ad valorem (property) taxes and insurance premium taxes both showed substantial growth due to the inflationary impacts on house and other property values,” Fulford said. “Interest on state deposits continues to grow, but at a slower pace than last year due to fund balances being expended/transferred. The Atlanta Federal Reserve now projects only a 10% chance of an interest rate cut in March.
“… The timing of any cuts this year should shield the General Fund from having a major reduction from this revenue source in FY 2024, but the rate cuts will likely have a much larger impact in 2025 and continuing into 2026.”
Alabama Daily News’ Kate Essig contributed to this report.