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Sunday marked one year since lawmakers passed landmark legislation to cut the state’s sales tax on groceries in half.
On Sept. 1, 2023, the grocery tax dropped from 4 percent to 3 percent in the first step of a plan to reduce the tax on groceries. The bill ensures another 1 percent reduction when the state’s budget hits a mark that would make it financially viable.
“People came out, they showed out, they showed their support and their desire to see this happen in 2023,” said Akeisha Anderson, former policy and advocacy director for Alabama Arise. “That momentum and that outpouring of support really made a difference.”
An issue that had long been pushed by Democrats quickly became a bipartisan issue in the last session as Republican leaders began to back the idea of eliminating the grocery tax.
Most states either do not levy a sales tax on groceries or offer a reduced tax on groceries. Some other states that have reduced their sales taxes on groceries are also working toward a complete elimination of the tax.
In Alabama, elimination of the tax could take some time under the current law. As lawmakers worked to get the bill across the finish line, language was added that would require the Education Trust Fund to see a 3.5 percent uptick in revenue during a given fiscal year to allow another 1 percent reduction in the sales tax.
There will be no reduction this year, as the state only saw a 1.5 percent increase in revenue.
Advocates at organizations like Alabama Arise have been fighting for years to eliminate the tax and said they will continue working to lobby lawmakers to reduce the tax.
“If you think about the grocery tax, it’s a tax on survival,” said Chris Sanders, communications director for Alabama Arise. “Food is not optional. We all have to eat to live. It’s not a luxury. It’s not a choice. We all have to buy food. We all have to have food to live, and taxing basic necessities of life like that, in my view, is immoral. It’s a bad choice.”
The cost to the Education Trust Fund budget has long given lawmakers pause to reduce the tax, but Sanders said lawmakers should look toward replacing that lost revenue in other ways.
“Alabama does not have to choose between untaxing groceries and funding public schools,” Sanders said. “We can and we should and we will do both.”
The legislation also established a commission to consider other ways to continue reducing the grocery tax.
Though a 2 percent sales tax cut may not sound like a large impact to the casual observer, it is the largest tax cut in state history. The Legislative Services Agency estimates that in 2024 the first phase of the tax cut will save Alabamians $152 million. Once fully implemented, eliminating half of the grocery tax will save citizens $318 million per year.
