
Alabama Legislature Reduces Grocery Tax After Decade Long Efforts
- foodfightadmin
- June 2, 2023
- Hunger In America, State
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In a groundbreaking development, lawmakers in Alabama have passed a bill that could lead to lower grocery prices for families in the state. The legislation, which aims to gradually eliminate half of the current 4% state sales tax on food, marks the culmination of years of unsuccessful attempts to achieve such a tax cut.
Following the final passage of the bill, it now awaits the review of Governor Kay Ivey, whose office has stated that she will assess it upon receipt. Alabama is one of only three states that subject groceries to the same tax rate as other purchases. Advocates have long contended that taxing food at this level places an unjust burden on families in the poverty-stricken Southern state, where 16% of the population lives in poverty and the median household income is approximately $54,000.
On Thursday, the Senate unanimously approved an amended version of the bill that had previously passed in the House. Later, the House voted unanimously, with a tally of 103-0, to accept the change.
This final legislative approval comes after decades of efforts at the Statehouse in Montgomery, but the current measure garnered broad bipartisan support against the backdrop of skyrocketing food prices and a significant state budget surplus.
Under the legislation, the state’s 4% sales tax on food would be gradually phased out by September 1, 2024, if there is sufficient revenue growth to offset the loss.
Republican Senator Andrew Jones, the sponsor of the Senate version, expressed his satisfaction with the passage, emphasizing the positive impact it would have on working Alabamians struggling to afford food. He also noted the historic nature of the tax cut, which would amount to over $300 million annually, and highlighted the long-standing quest for such a reduction. Similar proposals to lower the tax had been unsuccessfully put forward in Montgomery since at least the early 1990s, partly due to concerns about the potential impact on education funding.
Currently, the 4% tax contributes over $600 million each year to Alabama’s Education Trust Fund (ETF), which presently totals slightly more than $8 billion. Halving the tax would result in an annual cost of approximately $300 million for the education budget.
State Representative Patrice McClammy, a Democrat from Montgomery, expressed satisfaction with the progress made, recognizing it as a starting point toward a complete repeal of the grocery tax. McClammy and Jones revealed that a study commission would be established to explore the possibility of eventually eliminating the tax in its entirety.
The approved bill stipulates a reduction of the food tax from 4% to 3% on September 1. It would then further decrease to 2% on September 1, 2024, provided that tax collections for the Education Trust Fund are projected to rise by at least 3.5% to compensate for the loss. If the growth requirement is not met in 2024, the tax reduction would occur in the subsequent year when the requirement is fulfilled.
To safeguard against potential losses in education funding, the Senate accelerated the pace of tax reduction but also increased the required revenue growth from 2% to 3.5%. The House accepted this change on Thursday afternoon as the bill moved toward final passage. If signed into law, the legislation would prevent local governments from imposing additional taxes on groceries.
Alabama Arise, a group which advocates for low-income families, has long pushed for the removal of the grocery tax. Executive Director Robyn Hyden believes that reducing the state sales tax on groceries will provide meaningful assistance to Alabamians struggling to make ends meet. Hyden also expressed that the grocery tax reduction is a crucial step toward rectifying the imbalances in Alabama’s tax system, which disproportionately burden lower and middle-income households compared to the wealthiest households.