Gov. Ivey signs grocery tax reduction into law; tax to drop by 1% in September
Alabama Gov. Kay Ivey on Thursday signed legislation to reduce Alabama鈥檚 sales tax on groceries.
The tax cut will reduce the state鈥檚 4% tax on groceries to 3% on Sept. 1. The tax will drop to 2% on Sept. 1, 2024, but only if tax collections to the Education Trust Fund are projected to rise at least 3.5% to offset the loss. If the growth requirement isn鈥檛 met, it will be reduced to 2% in the next year that the growth requirement is satisfied.
鈥淎s Alabamians and Americans alike are grappling with tighter times, I am hopeful that this decision by the Legislature to slightly reduce the sales tax on certain food items will be truly felt by Alabama families,鈥� Ivey said in a statement.
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Alabama is one of only three states that tax groceries at the same rate as other purchases. Advocates had long argued that taxing food at such a rate placed an unfair burden on families in the poor Southern state, where 16% of the people live in poverty and the median household income hovers around $54,000.
Some lawmakers had tried unsuccessfully for decades to remove the tax. The measure gained broad bipartisan support this year against a backdrop of soaring food prices and a hefty state budget surplus.
However, efforts to remove the full 4% tax faltered because of concerns about the loss of funding to the state education budget and a lack of political will to raise other taxes to offset the loss. The current 4% tax provides more than $600 million annually to the state for its Education Trust Fund, which currently totals a little more than $8 billion.
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Lawmakers are creating a study commission to explore the possibility of eventually removing all of the tax.