Grocery tax cut bill passes its first hurdle in Alabama House

Reprinted from the Montgomery Advertiser
May 29, 2023

An Alabama House committee Wednesday approved a bill that could cut the state grocery tax in half over several years.

HB 479, sponsored by the House Ways and Means Education chair Danny Garrett, R-Trussville, would reduce the tax rate to 3% on Sept. 1. The tax would be cut down to 2% in subsequent years if revenues in the Education Trust Fund grew by at least 2% annually.

The bill passed on a voice vote. It would not reduce city or county taxes, which are decided locally.

“We’ve taken the current scenario we have with all of our funding,” Garrett said. “We looked at the projected revenue, the budget, the spending, the reserves all that we factored in a mild recession. And we believe that we are confident that we can handle this proposal.”

The cut would apply to food covered by the federal Supplemental Nutrition Assistance Program (SNAP). The Legislative Fiscal Office estimates that reducing the state grocery tax to 2% would cost the ETF $318 million a year, when fully implemented.

Alabama is one of just 13 states that taxes groceries, and one of only three states that taxes groceries fully. With local taxes added, Alabamians can pay up to 10% on grocery bills. Critics have long argued the tax hurts the poor and adds to food insecurity.

Under the bill, a family paying $500 a month in groceries and paying a 10% tax would see their food taxes fall from $600 a year to $540 year when the state tax is cut to 3%. It would fall to $480 a year at a 2% state tax rate.

Supporters of the bill said at a hearing prior to the committee vote that the bill would help Alabamians in everyday life.

“Untaxing groceries has long been at the top of the list to help regular everyday working-class folks who spend a disproportionate amount of our income on sales taxes like groceries,” said Robyn Hyden, executive director of Alabama Arise, a nonprofit that works on poverty issues.

The legislation does not replace the revenue that would be lost. The School Superintendents of Alabama and the Alabama Education Association spoke against the bill, saying that it could hurt the ETF.

Ryan Hollingsworth, executive director of School Superintendents of Alabama, said there have been many bills this session that diverted money from schools, like tax credit bills.

“I ask you to be very cautious as you proceed to look at cuts to the ETF long term when we’re looking at a temporary economy,” he said.

On the committee, some legislators had questions around a provision of the bill that would not allow municipalities to raise the tax on groceries.

The legislation would freeze local grocery taxes at their current rates. Under an amendment approved by the committee, cities and counties could cut their food taxes and later raise them to the frozen rate but could not go above it.

Rep. David Faulkner, R-Mountain Brook, said he wasn’t advocating for an increase in taxes, but he questioned what would happen if a local government needed to raise revenue from a sales tax increase.

“A grocery store, in a small municipality is the, in many times, the number one generator of taxes in that city,” he said. “And I’m wondering if we can find some balance here because I would hate to do something for the future. Meaning that these cities are forever prohibited from being able to raise their sales tax.”

Rep. Anthony Daniels, D-Huntsville, said that he understood that portion of the bill to provide relief to families. He said that if the cost of items goes up, the tax will also go up, which would be a revenue gain.

“I think our whole, you know, making a decision is to try to give some relief to families and so I’m not necessarily seeing why they would need to increase it more than where they are right now,” he said.

The legislation moves to the full House of Representatives. It needs at least three more days to pass. There are five days left in the Legislative Session.

The Hornet Tribune

The Hornet Tribune

The Hornet Tribune

Grocery tax cut bill passes its first hurdle in Alabama House

The Hornet Tribune

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