Study group discusses grocery tax situation

MONTGOMERY, Ala. — Lawmakers who have advocated for a reduction of the state’s sales tax on groceries met Monday to discuss next steps after learning another one percentage point won’t come off the now 3% tax in the fall.

Gov. Kay Ivey signed a law last year to lower the sales tax on most grocery items from 4% to 3%. The law also said it could drop further to 2% by September of this year if the total revenue growth in the Education Trust Fund for fiscal year 2025 was expected to be at least 3.5% higher than fiscal 2024.

However, state budget leaders revealed last week that the expected growth in the Education Trust Fund for 2025 is projected to be less than 2%.

Now, that second percentage point can come off the tax when the 3.5% growth is reached. But as discussed by the Joint Study Commission on Grocery Taxation Monday, any deductions to other ETF revenues approved by lawmakers in the current session — including Ivey’s proposed funding of private schools through education savings accounts, will further the state further from that grocery tax decrease.

“I think we’ll know more as we end the fall, certainly the fact the growth was so much smaller than anticipated this year around 2% or a little bit less than 2%,” Jones said on APT’s Capitol Journal Monday. “There’s a possibility in my mind that if we had a lower-than-average year that maybe next year will be at average or above.”

Several groups, including Alabama Arise, which advocates for low-income Alabamians, and the Alabama Grocers Association, are asking lawmakers to modify the 2023 bill to allow the additional penny to fall off the tax sooner. Both groups said the decrease that went into effect in September is already helping Alabama families and having less of an impact on the ETF than originally expected.

“I did feel disappointed, personally, and some of my constituents are disappointed,” McClammy said about not getting a second cut this year.