Alabama “Fair Tax” Legislation Would Replace Income, Sales TaxWith Consumption Tax

Alabama Rep. Mike Holmes, R-Wetumpka, prefiled “fair tax” legislation for the 2020 regular session that replaces state income and sales taxes with a statewide consumption tax.

The legislation, called the "Alabama Economic Freedom Act", would create a uniform 8.03 percent tax on all purchases of goods and services in the state. The tax is designed to generate the same amount of revenue for the state as the traditional income and sales tax system.

The Income Tax Division of the Alabama Department of Revenue would be rendered obsolete and the collection of the consumption tax would be redirected to the Sales Tax Division.

Holmes said the current system picks winners and losers through a “never-ending maze of tax exemptions, deductions, and credits” in a release. The system proposed in the legislation is simple and one people can understand, he claimed.