A new bill prefiled in February could significantly reduce taxes on groceries in Alabama, with a number of new lawmakers voicing support for the general idea.
Filed by Rep. Chris England, D-Tuscaloosa, House Bill 15 would give municipalities the authority to exempt food from their local sales taxes, allowing them to carve out food from the tax without affecting the rate on other purchases.
Other legislators who have expressed interest in eliminating or reducing taxes on groceries include Reps. Patrice McClammy, D-Montgomery, Chad Robertson, R-Heflin, Ben Harrison, R-Elkmont, Rick Rehm, R-Dothan, and House Minority Leader Anthony Daniels, D-Huntsville.
Alabama is one of just three states to tax groceries at the full state sales tax rate, which currently sits at 4%. Coupled with county and city sales taxes, Alabamians can pay as much as an 11% tax on groceries.
Numerous attempts have been made over the years to reduce or eliminate the grocery tax, all to no avail. As the revenue from the grocery tax – which generates approximately $500 million annually – is a stable revenue sources for the state’s Education Trust Fund, opponents of altering the tax often point to the deficit it may cause in funding the state’s schools.
Proponents of the measure such as Daniels have argued that the money saved by residents on grocery bills generally end up being spent on other items, ending up in the state’s sales tax coffers regardless.
‘It would be an instant relief’
McClammy, who assumed office in late 2021, said she plans to introduce her own bill this upcoming session to eliminate the state’s tax on groceries, piggybacking off of efforts by former State House Rep. John Knight that go back more than 15 years.
“I’ve lived in several states outside of Alabama, and we are one of three states that still has a sales tax on our groceries,” McClammy told Alabama Daily News.
“All of this fits together (with) health care, (as people) have been put in a situation of making decisions on how much it costs to get medications for the family, but then you go to the grocery store and you’re coming back with $100-$200 bills. People are making decisions at all ages of ‘do I get medicine, [or] do I get gas?’”
McClammy acknowledged the budget hole that eliminating the state’s grocery tax would leave in the Education Trust Fund, but said she and her colleagues would find a solution.
“We really have to be careful and strategic to get the funding to replace the Education Trust Fund. Right now we’re in a good state, but what happens in a year or two? So we are being very strategic in studying this and looking at all the areas we can fund this.”
Robertson, a freshman legislator who assumed office this past November, said his district, which borders Georgia just east of Birmingham, was particularly affected by the state’s grocery tax.
Robertson told ADN that many residents in his district do their shopping across the state border in Georgia – which has no state sales tax on groceries – as to avoid the increased costs. Beyond bringing back potential sales tax revenue from Georgia, Robertson also said a reduced tax on groceries could provide “instant relief” to low-income families and residents.
“I would like to reduce the grocery tax, but not eliminate it,” Robertson said.
“I know at the moment nobody has figured out a good way to replace that for the school system, (and) I know that’s a concern, but our budget is strong at the moment. I feel like we’re headed in the right direction, so I feel like we can explore options to reduce that burden on our citizens.”
Robertson also mirrored Daniels’ position that the tax revenue lost from reducing taxes on groceries would likely be made up and then some through that money being spent on other items.
“People with a fixed income, retirees, lower-income families, it would be an instant relief, an instant help, and I believe they would spend it right back in Alabama, so I believe the revenue will increase,” he said.
“It may be different revenue, but I’m hoping it will release the strain on lower-income families and they’ll be able to do other stuff with their money instead of having to worry about feeding their family all the time. I believe that would be an instant relief for a lot of Alabamians, especially in my district.”
Rehm, another freshman legislator, campaigned heavily on ending the grocery tax, but told ADN that he wouldn’t be opposed to a hybrid model of sorts that excludes more essential groceries like eggs, meat and produce from sales tax. Also a freshman legislator, Harrison campaigned on eliminating or reducing the state’s grocery tax as well.
An uphill battle
Despite the renewed push to eliminate or reduce the state’s grocery tax, the effort will likely be an uphill battle as state leaders continue discussions on the 2024 fiscal year budget.
When asked if he saw any flexibility in altering the state’s grocery tax, Alabama House Speaker Nathaniel Ledbetter said he didn’t know, and that talks were still ongoing.
“I don’t know right now, I think we’re still in the negotiating stage,” he said regarding the proposed reduction or elimination of the state grocery tax.
“I think there’s a lot of possibilities out there we’re going to look at, (but) until we have something concrete, I really don’t know. I think everybody would like to see us give something back to taxpayers of this state; what form that will be in, I think that discussion is ongoing.”
Rep. Danny Garrett, R-Trussville, the chair of the Ways and Means Education Trust Fund Committee, said that while he was open to discussions on reducing or eliminating the grocery tax, it was important for proponents of the measure to understand its complexities.
“The first thing I think to understand is that Alabama has one of the lowest incomes per capita in the country, we have a higher poverty rate than the average state, however, we have the lowest tax burden per capita in the country,” Garrett told ADN.
“The average state collects 34% of its revenue from property taxes; Alabama collects only 17% of our revenue from property taxes, we are number 50 in property tax collections. The second thing is, the state sales tax rate for Alabama is the second lowest in the country at 4%. ”
Garrett called Alabama’s taxes a “trade off,” explaining that while it was one of few states to tax groceries at the full state sales tax rate, the overall tax burden on residents was still among the lowest due to lower taxes on things like property or services. He said that the poorest Alabamians, such as those receiving food assistance, are often exempt from paying sales taxes on groceries.
“You hear a lot of the time people say that they want to limit the grocery tax because that affects the poorest of the poor,” Garrett said. “The poorest of the poor who are on entitlement programs are already exempt, those using food stamps or other similar federal assistance, you’re not paying sales taxes.”
As of 2022, Alabama was the sixth poorest state in the country, with more than 714,000 – including 222,000 children – living below the poverty line. Per the U.S. Department of Health and Human Services, the federal poverty level in 2022 for an individual was an annual income of $13,590 and below, or $27,750 and below for a family of four.
To be eligible for the Supplemental Nutrition Assistance Program (SNAP) in Alabama, an individual cannot make more than $17,667 a year, or $36,075 for a family of four. Alabamians are also ineligible for SNAP if they have a bank balance of more than $2,000, or $3,000 if living with a person over 60 or with a disability.
Another important factor Garrett noted is the fact that cities and counties in Alabama have the authority to impose their own sales tax rates that affect groceries. Should the state eliminate its sales tax, he would want to ensure that local municipalities didn’t simply raise their own sales tax rates in response, effectively negating the tax reduction.
“If we really want to reduce grocery taxes, and that’s going to come out of the state Education Trust Fund, then we’re going to have to make sure that we’re not just shifting it to the locals (municipalities),” Garrett said.
“So I’m not opposed to us discussing it, but people need to understand that we already have the lowest state sales tax in the country. Yes we tax groceries, but we don’t tax a lot of other things that other states tax.”
The state legislature will convene on Mar. 7, with HB15 set for its first reading that same day. McClammy has yet to file her bill combating the state’s grocery tax, but has said she plans to during this upcoming session.