A new law aimed at helping save money for shoppers across Alabama takes a step forward. Governor Kay Ivey signed legislation into law back in June that cuts the statewide 4% grocery tax in half. The legislation will reduce the tax to 3% on Sept. 1, 2023, and aims to reduce to 2% on Sept. 1, 2024.
Chris Sanders is the Communications Director for the nonprofit Alabama Arise. He spoke with Alabama Public Radio back when the state legislature signed off on the legislation. Sanders said this cut will increase in value as grocery prices continue to rise across the nation.
“This bill's passage is a win for every Alabamian, and this grocery tax reduction will benefit every single person across Alabama,” he said. “It will make it easier for people to make ends meet and to provide for their families. This is a big step towards righting the wrongs of our state’s upside down tax system.”
While the 2023 deduction from 4% to 3% is guaranteed in the bill, the 2024 deduction from 3% to 2% has a condition. The education revenue must increase by 3.5% to offset losses for the deduction to be activated.
Sanders said he supports eliminating the grocery tax entirely and is encouraged by the progress this bill is making towards that goal.
“If you think about the grocery tax, it's a tax on survival,” he said. “Food is not optional. We all have to eat to live. It's not a luxury. It's not a choice. We all have to buy food. We all have to have food to live, and taxing basic necessities of life like that, in my view, is immoral. It’s a bad choice.”
Alabama Arise has held listening sessions this summer with communities who could be impacted by the grocery sales tax and its potential reduction. Sanders said the grocery tax is making it much harder on people to make ends meet and that the rising prices of groceries makes a tax deduction even more necessary for struggling families.
“History tells us that over the course of decades, prices on food and on everything else tend to go up,” he said. “This grocery tax cut is only going to continue to grow in value and meaning as prices continue to increase through the years and through the decades. We're really glad that this is on the books now.”
Alabama is the only state in the nation to use the Federal Income Tax Deduction. This means that people are allowed to deduct their federal income tax payments in full from state income tax payments.
Sanders said while this may provide small breaks for some households, the richest taxpayers in the state are seeing breaks of thousands of dollars. Closing this loophole, he said, could be the key to increasing revenue and ending the grocery tax entirely.
“We think that it makes sense from a revenue standpoint and from a moral standpoint to give a tax reduction to the people who need it the most,” he said. “To pay for that, having a very modest increase through the closure of a skewed tax loophole for people who are making the most and can afford to contribute a little more toward the common good.”
Using data from the USDA, those with Alabama Arise estimate the 1-cent reduction could save a family of four about $150 a year.