The city of Clay has cut the local grocery tax in half to help residents during a financially challenging time.

State lawmakers applaud the city for its efforts following failed attempts to kill the state grocery tax.

According to the U.S. Department of Labor, the national inflation rate in July was 8.5%. Those rising prices in the grocery store had Clay City Manager Ronnie Dixon thinking outside the box.

“It’s really just to help the people that will experience a tough time over the next three years, and I think we all are,” Dixon said.

Dixon proposed a 1-2% decrease in the city’s grocery tax, and the city council decided on a 2% decrease. The council voted to amend the city ordinance in a 5 to 0 vote Tuesday night. Councilor Becky Johnson was the only councilor not in attendance at the meeting. Instead of paying a 4% local tax on groceries, shoppers will now only pay 2%, driving the overall tax from 10% to 8%.

The State Legislature has considered getting rid of the grocery tax in Alabama for years, but thus far, every bill has failed. State Rep. Danny Garrett (R-Trussville) said he applauds the city of Clay for taking the reins and helping citizens in its own way.

“With the locals actually cutting the tax, that’s the first I’ve heard of that around the state, and if that’s true, that would be good for the people of Clay, and that would be a good move,” Garrett said. “…that’s a way they’re trying to help out, and that’s great.”

But there is more to ousting the tax statewide than some people think, Garrett said. When neighboring states have made similar moves, Garrett said their situation differs from Alabama.

“You can’t just look at one tax in a vacuum and compare that to another state,” Garrett said. “You have to look at the overall picture. Alabama may have a higher tax rate on one area, but then we also have a lower tax break or don’t tax people in another area.”

Garrett said examples are taxes on services and higher property taxes in other states.

“When you compare one item to one item, you might see a different picture,” said Garrett. “You have to look at it comprehensively at the whole thing. So, we’re doing that. We’re looking at the federal money received to stimulate our tax situation. We certainly have a lot of cash … I feel certain that we’re going to strongly consider a tax rebate, which is a one-time thing.”

State Sen. Linda Coleman-Madison (D-Birmingham) said she had backed a statewide grocery tax decrease or elimination as long as the state can afford it. But for the local effort, she hopes it catches on.

“Quite frankly, I think they’re pacesetters,” Coleman-Madison said. “…everybody has to eat, and times are getting hard. While that little bit may not be a whole lot, it can really make a difference for [some] families.”

And the fact that everyone has to eat is what Dixon said he looked at closely when trying to figure out a way to help citizens.

“Everybody that lives in Clay don’t have kids, everybody that lives in Clay isn’t a senior adult,” said Dixon. “There’s just not anything that everybody does except for buy groceries.”

The items listed under the Supplemental Nutrition Assistance Program (SNAP) are eligible for the tax cut. You do not have to qualify for SNAP benefits to enjoy the tax decrease, but that is simply how the city is defining “groceries” for the change in its amendment to the grocery tax ordinance.

The amendment will last for two years when the city council can elect to extend it or let it end.

“[The council] can always amend it again to extend it, or they can amend it to make it permanent at the end of the two years or anytime in between,” Dixson said.

Dixon made the recommendation after looking at the city’s financial situation and figuring out what was fiscally possible.

“It’s not going to cost us anything because it’s not collected money, so I have to guess at it,” said Dixon. “So, my educated guess is that it will be about $600,000 per year.”

Coleman-Madison said she thinks the city of Clay could start a movement statewide, or even nationwide, of local governments stepping in to help the people.

“That’s a novel idea,” said Coleman-Madison. “This is a huge step in what everybody’s been talking about.”

State Sen. Shay Shelnutt (R-Trussville) agreed.

“I think Clay cutting their grocery tax is a good move on their part,” Shelnutt said. “I am not aware of any other cities in my district considering this. Anytime government can reduce the tax burden on its citizens, it should.”

Rep. Mike Holmes (R-Wetumpka) sponsored two grocery tax bills in the 2022 Regular Session. He also praised the city of Clay for the move.

“I have not heard of any municipalities doing that,” said Holmes. “…If they can do it and make it work, I think that’s great.”

Although he has term-limited himself and will not be running for office again, he said he hopes someone carries the torch on a statewide level.

“It’s one of my biggest disappointments in the eight years I served in the legislature,” said Holmes. “We could not get the leadership to go along with it…even though we had the votes to pass it.”

Holmes said with all the surplus cash from the federal government, there was no need to raise taxes somewhere else if the state cuts the grocery tax.

“Everybody criticized my bill because there was no stipulation to recover that income by raising taxes somewhere else,” Holmes said. “To me, that’s not a tax cut. That’s just playing Whack-A-Mole when you push it down someplace, and it pops up somewhere else.”

Although state lawmakers on both sides of the aisle have voiced support behind eliminating the grocery tax, Coleman-Madison said timing is everything.

“Right now could not be a better time,” said Coleman-Madison. “We have been trying to be very prudent in how [federal COVID-19 funds are] used and how it’s being appropriated…Now is a perfect time to start looking at giving citizens a break.”

On a local level, Dixon said he knows the city can handle the hit for at least two years in order to give that much-needed break to citizens.

“We have been promised relief from the grocery tax from the State Legislature for several years, and nothing has ever happened,” said Dixon. “We [the city of Clay] have put ourselves in a financial position that we can do this, and the citizens of Clay are going to be some of the hardest-hit by federal regulations that are coming down on grocery, gas, all of these prices that are going to be increased.”

Things like trash pickup and power bills have increased recently. Dixon said the decrease in grocery tax could make up for some of those things.

“For example, if you spend $100 a week on groceries, then you’re going to save $2, and if you pay your trash bill quarterly, you will save about $24 over those 12 weeks, and that $24 could go towards your trash bill.”

Four outlets in Clay offer SNAP-eligible items: Publix, the two Dollar Generals and Piggy Wiggly, including Ace Hardware inside the Piggly Wiggly.

“SNAP gives you the ability to buy seeds and plants and get that discount, so it will also help the Ace Hardware where you can buy seeds and plants to buy your own food,” Dixon explained.

Coleman-Madison said the fact that Clay has even talked about helping citizens financially is an example of what local governments can do.

“It’s all about giving the hard-working citizens, the everyday person, a break and pursuing our concerns about family,” Coleman-Madison said. “Clay, even in the thought of considering this, because there are many other cities in Alabama that are much larger, I haven’t even heard other local governments even talk about this. So, they are definitely being a pioneer and pacesetter even discussing that. I think it would mean a whole lot to the citizens to see that the city of Clay cares.”

The tax cut will begin on November 1.

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