MONTGOMERY, Ala. (WDHN) — A bill cutting the state’s grocery tax in half over the next year is now on Gov. Kay Ivey’s desk.
While it takes aim at the state’s 4% food tax, it also opens the door for local governments to do the same. Currently, cities and counties in Alabama cannot legally lower their own grocery taxes. This bill would change that.
Those with the Association of County Commissions of Alabama said it’s the first grocery tax cut bill that ties in local governments.
“And so this one did present a challenge for us,” ACCA Executive Director Sonny Brasfield said.
The ACCA was initially concerned over the bill because it lacked a budget growth requirement for locals to cut taxes. The final bill, though, includes letting localities cut their food tax by 25% if their local budget grows at least 2% annually.
“We’re comfortable with that,” Brasfield said. “What it will mean is that on the local level, the people who are elected to make those decisions will have the opportunity to align their budget needs with the removal of this tax and how it might impact the revenue they have to spend.”
Under the bill, localities can’t raise the food tax higher than where it’s at when the bill takes effect, if it becomes law. Brasfield said that does present some concerns because localities lack the same taxing power as the state.
“We would not be comfortable encouraging counties to make quick decisions,” Brasfield said. “We’ll work hard with all those counties that have an interest and make sure they do the right kind of due diligence before they make a decision.”
Alabama Arise Executive Director Robyn Hyden said this bill could potentially pave the way for a full state tax cut, someday.
“We really feel like this is just the first step,” Hyden said. “We’d like to cut the full 4% and do it responsibly,”
Hyden estimates when the full 2% cut takes effect, possibly as soon as next September, a family could save about a week’s worth of grocery money.
“For this year, it’s like you’re going to save $150 on groceries,” Hyden said. “Next year it will be $300, and hopefully we can keep going until you’re saving a full two weeks’ worth of food.”
If it becomes law, the first percent decrease will take effect this September. The second percent decrease will take effect September 2024 as long as the education budget grows at least 3.5%.