by MONTGOMERY, Ala. (AP) — Families in Alabama could soon be able to pay less at the grocery store after lawmakers Thursday finalized a landmark bill to eliminate half of the 4% state sales tax on food, ending decades of fruitless attempts at such a tax. were covered with snow.
The legislation now goes to the desk of Governor Kay Ivey, whose office said it will review it when it receives it. Alabama is one of only three states that tax groceries at the same rate as other purchases. Proponents had long argued that taxing food is an unfair burden on families in the impoverished state where 16% of people live in poverty and median household income hovers around $54,000.
The Senate voted 31 to 0 on Thursday to pass an amended version of a bill approved by the House. The House later voted 103-0 to pass the change.
Final legislative approval came after decades of efforts at the Montgomery Statehouse, but this year’s measure received broad bipartisan support against a backdrop of rising food prices and a sizable state budget surplus.
The legislation would phase out half of the state’s 4% sales tax on food by September 1, 2024, provided there is enough sales growth to offset the loss.
“This is going to be great for working Alabama residents. People are struggling to put food on the table,” Republican Sen. Andrew Jones, sponsor of the Senate draft, said after passage.
Jones said the day was historic because of the size of the tax cut, which would be worth more than $300 million annually, and because the tax cut had been sought after for so long. Similar legislation had been unsuccessfully proposed in Montgomery since at least the early 1990s, but never came to fruition, in part due to concerns over the loss of education funding.
The current 4% tax provides the state with more than $600 million annually for its Education Trust Fund, or ETF, which currently totals just over $8 billion. Halving the tax would cost the education budget about $300 million a year.
Alabama lawmakers had proposed multiple tax cuts this year. But the food tax proposal received widespread support, with nearly all 140 legislators signing on as sponsors.
“People were speaking from all over the state, across party lines, that they want a repeal of our grocery tax. And of course we didn’t get the full 4% up front, but this is a start,” said D-Montgomery State Representative Patrice McClammy.
McClammy and Jones said lawmakers are creating a study committee to explore the possibility of eventually doing away with all taxes.
The approved bill would reduce the tax on food from 4% to 3% by September 1. It would fall to 2% by September 1, 2024, provided that tax collections to the Education Trust Fund are expected to increase by at least 3.5% to offset the loss. If the growth requirement is not met to lower the tax to 2% in 2024, the next year the growth requirement would be reduced.
The Senate accelerated the pace of tax elimination on Thursday, but also raised the required revenue growth rate from 2% to 3.5% to avoid a loss in education funding. The House passed the amendment on Thursday afternoon as the measure moved toward full passage.
“I think there is some concern among members that we are heading into potentially dangerous economic times… so we wanted to make sure we have enough growth in the ETF (Education Trust Fund) to support the grocery tax take-up ,” Jones said.
The legislation would also prevent local governments from raising taxes on groceries if signed into law.
Alabama Arise, an advocacy group for low-income families, had lobbied for the removal for years. Executive Director Robyn Hyden said cutting state taxes on groceries “will provide meaningful relief to Alabamians struggling to make ends meet.”
“This grocery tax cut will benefit every resident of Alabama. And it’s an important step toward righting the wrongs of our state’s reverse tax system, which forces low- and moderate-income Alabama residents to pay a higher proportion of their income in state and local taxes than the wealthiest. households,” Hyden said.
Kim Chandler, The Associated Press
