Bipartisan Alabama measure cutting half of state’s 4% sale tax on food advances in state Legislature

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Alabama lawmakers on Wednesday advanced legislation to remove half of the state's 4% sale tax on food, a proposal that has garnered wide bipartisan support among lawmakers this year.

The House Ways and Means Education Committee approved the tax cut as part of an appropriations package that also included a nearly $9 billion education trust fund budget, the creation of a new state savings account and a one-time tax rebate of $210 per tax person. The bills now move to the full House of Representatives.

Alabama is one of only three states that tax groceries at the same rate as other purchases. Removing the tax has been unsuccessfully proposed for decades in Montgomery, but has finally gained traction this year in the face of the budget surplus and soaring food prices. The proposed legislation would gradually remove the tax, provided there is enough growth in tax collections to offset the revenue loss, until the tax drops to 2%.

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Proponents said reducing the tax would help Alabamians every time they walk in the grocery store.

"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," Robyn Hyden of Alabama Arise, an organization that lobbies for policies benefiting low-income families, told the committee.

Almost every member of the Alabama Legislature is in support of the proposal. All 35 state senators and 100 of the 105 representatives have signed on as sponsors of the initial legislation.

A customer shops at a grocery store in Brooklyn on Feb. 14, 2023. An Alabama state committee has advanced a measure that would cut the sale tax on groceries from 4% to 2%.  (Michael Nagle/Xinhua via Getty Images)

But some groups, including the organization that lobbies for teachers and public school employees, expressed concern about a loss of revenue for the state education budget.

The 4% tax provides $608 million annually to the state, according to estimates from the Legislative Services Agency.

Allison King of the Alabama Education Association told the committee the state's budget surplus is temporary.

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"AEA is not against cutting grocery taxes, but we are against cutting grocery taxes without an equally reliable funding source to replenish the lost revenue," King said. King said while Alabama is one of the few states to fully tax groceries, most other states have higher property taxes or other revenue sources to fund education.

In the wake of a record education budget surplus, legislative leaders said, they are trying to strike a balance between spending, tax breaks and and saving.

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The committee also approved an $8.8 billion education trust fund budget that includes a 2% pay raises for public K-12 education employees. The House committee on Wednesday also increased the amount of proposed one-time tax rebates. The committee approved rebates of $210 per taxpayer and $420 for married couples. That is double the size of the rebates approved by the Senate.

Lawmakers are also proposing to steer nearly $300 million to a new savings account called the Educational Opportunities Reserve Fund, which could be tapped during a revenue shortfall or to address education needs as they arise.

"All of this extraordinary revenue is going to run out eventually ... so having a little reserve, and extra places where we have put money away that that we could slide into those low points, is very, very wise," said Rep. Terri Collins, R-Decatur.