MONTGOMERY — Gov. Kay Ivey is including a one-time tax rebate, but no permanent tax cut, in her proposed budget for the next fiscal year.

Bill Poole, Alabama Department of Finance director, said at a budget hearing at the State House on Tuesday that Ivey's proposed budget for fiscal year for the state's General Fund in 2024 was $2.97 billion, an 8.42% increase over the current fiscal year. Ivey's proposed budget for the Education Trust Fund for fiscal year 2024 was $8.79 billion, a 6.5% increase over the current fiscal year.

The state has an approximately $3 billion combined General Fund and Education Trust Fund budget surplus after the most recent fiscal year 2022.

"In terms of priorities, there has been discussion of a tax rebate," Poole said. "That will be a priority."

Some other budget priorities mentioned by Poole included retiring debt, capital project funding for K-12 and higher education, teacher compensation, increasing reserve funds, state employee compensation, Medicaid funding and Department of Correction funding.

State Rep. Steve Clouse (R-Ozark) said at a Dothan Area Chamber of Commerce meeting on Monday that an idea "that's being floated" is a one-time tax rebate of $250 to $300 per taxpayer. 

The rebate would cost the state $500 to $600 million and "maybe even more," according to Clouse.

"That will certainly be a vigorous debate, and it will take place pretty early in the session," Clouse said.

Alabama House Democrats called for a repeal of the state's sales tax on groceries on Monday.

House Minority Leader Anthony Daniels (D-Huntsville) said state revenue wouldn't decline too much with a repeal of the state sales tax on groceries because consumers would spend the savings on other items.

"Those individuals that think this is too much of a hit on the front end, then let's do a payroll tax month to test it," Daniels said. "June of 2023, do a month-long (test) of no tax on groceries. Once the receipts come in for the growth in the Education Trust Fund, you compare it to the previous year, and then it will tell us if whether or not what we're saying is accurate. I don't believe there's going to be a hit because they're going to spend money in other areas."

Alabama is one of just a few states that taxes groceries at the full state sales tax rate. According to the Tax Foundation, Alabama has the fourth-highest state and local combined average sales tax rate. Alabama's state sales tax rate is 4%.

The proposed budget is for the fiscal year 2024 budget which begins on Oct. 1, 2023, and ends on Sept. 30, 2024.

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