Gov. Kay Ivey signs grocery tax cut into law

Gov. Kay Ivey Thursday signed the first cut in the state’s grocery tax since 1939, a long-sought move which seemed unlikely at the start of the legislative session in March.

“As Alabamians and Americans alike are grappling with tighter times, I am hopeful that this decision by the Legislature to slightly reduce the sales tax on certain food items will be truly felt by Alabama families,” Ivey said in a statement.

The Legislature passed the bill June 1 after clearing the Senate by a vote of 31-0. The measure reduces the state’s portion of the grocery tax from 4% to 3% beginning in September.

If next year’s Education Trust Fund (ETF) budget increases 3.5% next year, the tax will be cut from 3% to 2%.

Alabama is one of three states that fully taxes groceries. With local levies included, some residents can pay as much as 10% additionally for staple items they purchase.

Lawmakers have been trying to repeal the tax for decades, but with the tax contributing over $600 million annually to the ETF, legislators had been reluctant to repeal the tax without replacing the revenue. But high revenues into the ETF this year made the proposal more attractive to lawmakers.

The bill also freezes local sales taxes on groceries. Local governments may reduce their grocery tax rate but would not be able to raise them to more than the current rates they have established.

Alabama Arise, a nonprofit that focuses on poverty, was one of the bill’s strongest advocates. Chris Sanders, the communications director for Alabama Arise, welcomed the news, thanking supporters and legislators for their support.

“The state grocery tax is a cruel tax on survival, and Alabama Arise remains committed to the goal of eliminating it entirely,” he said. “We look forward to working with the state’s new Joint Study Commission on Grocery Taxation to find a sustainable and responsible path forward to remove the rest of the state grocery tax. There are many better options to raise revenue for vital services in Alabama than taxing a necessity of life.”