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The Alabama House of Representatives returned from spring break on Tuesday and unanimously supported a tax relief package that will save Alabamians about $192 million.
“With the passage of this tax cut package, the Alabama House of Representatives has now passed 15 tax cuts since the current quadrennium began in 2022,” said House Speaker Nathaniel Ledbetter, R-Rainsville. “As shopping carts get lighter and grocery bills continue to rise, I am particularly proud that we were able to double down on the grocery tax cut, which is the largest cut in state history and will save Alabama families a minimum of $236 per year.”
The package was sponsored by Rep. Danny Garrett, R-Trussville, who chairs the House Ways and Means Education Committee.
“Any time the Legislature is in a position to cut taxes and help every single Alabamian hold on onto more of their hard-earned money, we need to act upon that opportunity,” Garrett said. “Everyone is experiencing sticker shock at the grocery store, senior citizens are living on fixed incomes that do not go as far as they once did, and every working Alabamian benefits from increasing the optional standard deduction. I am proud to carry this package and look forward to continue working to provide relief to the people of Alabama.”
HB386 would further reduce the state’s sales tax on groceries by 1 percent after the Legislature approved a 1 percent cut last session. The original legislation provided for the opportunity for another 1 percent reduction this year, but guardrails included in that bill would mean no additional grocery tax cut under current law. HB386 circumvents that and would allow the additional 1 percent reduction immediately.
Before last year’s reduction, the state levied a sales tax of 4 percent on groceries and is one of the few states in the country to still tax essential goods. If HB386 is approved by the Senate, the tax on groceries would be reduced to just 2 percent.
A companion bill, HB387, removes limits on counties’ and municipalities’ abilities to reduce their own taxes on food and groceries. Local governments are currently restricted to 25 percent cuts annually unless they meet certain growth requirements.
HB388 would double the exemption for retirees ages 65 and older relying on defined contribution retirement plans such as 401(k)s and IRAs. The current exemptions of $6,000 per individual or $12,000 per couple would be doubled to $12,000 per individual or $24,000 per couple.
The final bill, HB389, would raise the minimum income for standard deductions and increase the maximum salary threshold for the maximum dependent exemption.
“This is designed to help working families, primarily those making $60,000 or less and giving them a tax break,” Garrett said.
Some Democrats came to the floor Tuesday to voice concerns about replacing that $192 million in revenue as federal money for education dries up, but Garrett said the ETF can remain healthy despite the cuts.
The bill now moves to the Senate for further deliberation.
