The package of tax-cut bills that sailed through the Alabama House last month but stalled in the Senate could still get some attention this week as the Legislature’s 2025 session nears its end.
The four-bill package totals about $192 million in cuts, the largest of which takes a percentage point off of the state’s sales tax on groceries. It quickly moved from introduction to House passage in mid-March, but hasn’t moved since in the upper chamber.
Sen. Arthur Orr, R-Decatur, said the bills will be considered “in some shape, form or fashion.”
“We’re looking at amendments,” Orr, chairman of the Senate’s education budget committee, told Alabama Daily News. The bills would reduce revenue to the state’s Education Trust Fund.
Details of the amendments weren’t yet available. Talks with leadership are pending, Orr said, but the bills are still in play in the final two weeks of the session. A meeting agenda for the committee had not been released as of Tuesday morning.
On Monday, the Alabama Republican Party released a statement saying Chairman John Wahl has been “working closely” with Senate leadership to amend the bills.
“Our focus has always been on delivering real, lasting tax relief for the people of Alabama — families, seniors, and job creators alike,” Wahl said in the statement. “One of our top priorities is cutting the grocery tax and making sure every single person in Alabama gets some help making ends meet. It’s time to let people keep more of their own money.”
When the bills passed the House, sponsor Rep. Danny Garrett, R-Trussville, said they were an alternative to extending the tax cut on hourly workers’ overtime earnings. His proposal would benefit more people, Garrett, chair of the House education budget committee, said then.
House Minority Leader Anthony Daniels, D-Huntsville, proposed extending the overtime tax cut that took effect in early 2024, but that bill has not advanced. That cut, widely supported by Democrats and Republicans when approved, has cost the state more than state leaders expected.
The House-approved bills:
- House Bill 386 cuts the state’s grocery tax from 3% to 2%, beginning Sept. 1. Alabama lowered tax on food from 4% to 3% in 2023 and set a trigger for an additional one-percentage-point reduction if revenue growth reached a certain level. However, that growth has not been reached. A fiscal note shows the proposed cut would save Alabama taxpayers, and cost the state, $122 million per year.
- House Bill 387 bill gives local municipalities the authority to lower sales tax on groceries by resolution or ordinance. “We’re basically removing (the barrier) and saying ‘locals, if you want to reduce your tax by any amount, whenever you want to do it, just do it,” Garrett previously said.
- House Bill 388 doubles the state’s income tax exemption from $6,000 to $12,000 for individuals 65 years old or older who withdraw funds from a defined contribution retirement plan such as a 401(k) or Individual Retirement Account. If passed, the change would take effect on Jan. 1, 2026 at an estimated cost of $45 million.
- House Bill 389 focuses on tax relief for lower-income Alabamians. It would raise the standard deduction from $2,500 to $3,000 for individuals, and expand dependency exemptions beginning with the 2026 tax year.