Grocery tax cut will start moving next week, says House education budget chair

The chair of the Alabama House’s education budget committee said Wednesday he expects legislation reducing the state grocery tax to be in committee next week. 

House Ways and Means Education Committee chair Danny Garrett, R-Trussville, said after a meeting of the committee Wednesday that the committee would take up legislation Garrett filed on Tuesday, which has 100 House sponsors.

“If the grocery tax is a priority, and it clearly is, then we have to put that as something that we will deal with and that will cause us to take a pause on some other items,” Garrett said.

As filed, Garrett’s bill would reduce the state grocery tax from 4% to 3.5% on food covered by the Supplemental Nutritional Assistance Program (SNAP) on Sept. 1. The bill would cut the tax by an additional half-percentage point every year until the impacted groceries are taxed at a rate of 2%. Future reductions will only go into effect if the Education Trust Fund grows by 2% each year.

The bill would freeze local grocery tax rates, though it would allow local governments to reduce them if they desire.

Neither the House nor the Senate versions of the bill have fiscal notes. The Fiscal Division previously said that the tax brings in $608 million each year.

Garrett said there will be a substitute bill next week but did not share many details.

The bill would be in committee after the 24th day of the current session, which runs 30 days. It will need at least four days to pass both chambers and get to the governor’s desk, leaving little room for error. 

In response to a question about whether he has spoken with Sen. Arthur Orr, R-Decatur, chair of the Senate Finance and Taxation Education Committee, about the bill getting through both committees in time, Garrett said “it’ll get through.”

Orr said at the end of a Senate Finance and Taxation Education Committee meeting Wednesday that the House is planning to take up the grocery tax next week, and the Senate committee will look at it to better shape their decisions around tax credit exemption bills.

““So, kind of seeing where that is and then come with some kind of suggestion for the committee to consider as far as how we evaluate those going forward,” Orr said. 

Revenue bills must start in the Alabama House of Representatives.

One of 13

Alabama is one of 13 states that taxes groceries, and one of three that fully taxes food. Combined with local taxes, the levy can add up to 10% to the price of a grocery bill. In Montgomery, with a total grocery tax of 10%, a family that spends $500 a month on food would pay $50 in taxes.

As filed, Garrett’s bill would reduce the yearly grocery tax bill of that family from $600 to $480 a year. 

Grocery taxes go to the Education Trust Fund (ETF), the state’s education budget. That has made efforts to repeal the tax difficult. 

But with the ETF showing record revenues this year, lawmakers have been more open to cutting or eliminating the tax. Multiple proposals have been filed in the House and Senate.

Earlier in the session, Orr and Garrett had introduced bills that would remove the grocery taxes for food covered by the Special Supplemental Program for Women, Infants and Children (WIC), a federal program assisting low-income women and children under the age of 5.  The WIC definition covers fewer food items than SNAP. 

The proposed 2023-24 Education Trust Fund budget, running nearly $9 billion, passed the Senate on May 4. As of Wednesday afternoon, it had not been scheduled for a House committee vote.

The ETF’s good position has led to several calls to use the money for other projects, including tax incentives, voucher programs and even a Montgomery water park. 

“You take grocery tax, you take tax incentives, you take all these other tax cuts, you take income tax cuts, you take school choice bills, you put on the table, that altogether was close to $2 billion,” Garrett said Wednesday. “And, you know, we can’t do all of that.”