Since November 2022, the City of Clay has continued its 2% grocery tax cut. Locals are enjoying the break, the City is making moves to ensure it can continue giving it, and state lawmakers are taking notes.
The idea came from City Manager Ronnie Dixon when Alabama lawmakers were also discussing cutting the grocery tax. Dixon said then he was thankful there was a way to give citizens relief. He used the Supplemental Nutrition Assistance Program (SNAP) definition of "groceries" to determine what would be included in the tax cut.
Despite criticism from state lawmakers, Dixon said what he thought would happen is what happened. People are saving money in Clay, and the City can afford to help.
"What we saw at the beginning is what I expected, which is about half a million dollars per penny of tax reduction," Dixon said. "But because the price increases were so much during Biden's transitory time, we didn't see that much of a loss because two cents of two dollars is the same as four cents of one dollar and prices had increased 60, 70, 80 percent on grocery items."
In fiscal year 2021-2022, the last year with the full 4% tax, the City's grocery income tax was $2.3 million. In 2022-2023, the first year, minus one month with the 2% tax, the income was $2.15 million. In 2023-2024, the first full year of the 2% cut, the grocery tax income was $2.1 million.
Dixon said that to compensate for any loss, the City has cut back on buying unnecessary items such as new trucks and supplies. Those cuts have allowed the City's budgets from 2022 to the current year to be within 3% of one another. That three percent increase has been due to cost-of-living raises for employees and the cost of health insurance.
A year after Clay's tax cut was enacted, the State of Alabama reduced its grocery sales tax from 4% to 3%. State Rep. Danny Garrett (R-Trussville) recognized Dixon on the House floor last month for being a leader in grocery tax cuts.
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