Members of Grocery Tax Study Commission want to move forward with tax reduction; not sure when or how

Some members of Alabama’s Joint Study Commission on Grocery Taxation expressed a desire Monday to find a way to go forward in 2024 with another 1% reduction in the state’s 3% grocery tax.

Alabama Arise and Alabama Grocers Association also asked lawmakers on the panel to modify the 2023 law to allow the additional penny to fall off the tax this year. So far, no legislation has been introduced to make any changes since fiscal experts with the Legislative Services Agency and the state Finance Office announced Alabama’s Education Trust Fund will grow less than 2% and possibly as low as 1% in the 2025 fiscal year. It would take a 3.5% growth projection to automatically trigger another 1% drop in the grocery sales tax on Sept. 1 of this year.

The 11-member commission charged with finding ways to eliminate the state’s tax on groceries is to make its final report and recommendation “for any proposed legislation to eliminate the sales and use tax on groceries” by Nov. 1, 2026. The panel has not set a date for another 2024 meeting at this point.

As of Sept. 1, the state’s sales tax rate on Supplemental Nutrition Assistance Program, or SNAP, foods dropped from 4% to 3%. Revenue experts at first estimated that each percentage point drop in the food tax would reduce state annual revenues by about $152 million. Kirk Fulford, deputy director of the Fiscal Division of the Legislative Services Agency, told the commission, the first year’s 1% reduction estimate is now between $125 million and $130 million.

Fulford cautioned that proposed bills that would further deplete the state’s education budget, including tax exemptions/credits/deductions and school vouchers/education savings accounts could push the second 1% reduction in the grocery further into the future.

Rep. Troy Stubbs, R-Wetumpka, a commission member, said, “We’ve got to identify how we can resolve the immediate needs of the families, which are the definite food insecurity issues, while also making sure that all our education institutions are meeting the needs of the students.”

Allison King with the Alabama Education Association told the group, “We are not in opposition to cutting the grocery tax, but we’re going to have to find other revenue streams in order to keep our Education Trust Fund strong.”

At its 2023 meeting, some members of the group suggested other ways to eliminate the remainder of the state’s grocery tax while protecting the state’s education funding, including capping or eliminating the state deduction for federal income taxes. That solution has been introduced numerous times in past sessions without success. During Monday’s meeting, taxing services was mentioned, another proposal that has failed in the past.

>> Learn more about the state’s sales tax on SNAP foods

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