MONTGOMERY — Members of Alabama's Senate Education Budget Committee passed legislation on Wednesday that would cut the state's sales tax on groceries by 2%.

Currently, the state's sales tax rate on groceries is 4%. House Bill 479 by State Rep. Danny Garrett (R-Trussville) would drop the rate by 1% in September and an additional 1% in September 2025 if the state projects 2% growth in the Education Trust Fund (ETF) for fiscal year 2026 compared to the previous fiscal year. The average growth rate in the ETF annually is 3.6%, according to the Public Affairs Research Council of Alabama.

According to a fiscal note on the legislation, the tax cut would reduce revenue in the Education Trust Fund by $318 million annually once fully implemented. State government had a combined $3 billion surplus heading into the session this year.

State Sen. Andrew Jones (R-Centre) said at the committee meeting that a substitute amendment on the bill would be brought to the Senate floor and Education Budget Chair State Sen. Arthur Orr (R-Decatur) "may want to tweak the growth metric as we're moving forward." 

Under the current version of the legislation, the first 1% reduction of the state's grocery tax would happen in September automatically. If the legislation is amended to require a higher level of growth than 2% in the ETF, the second grocery tax reduction of 1% in 2025 will face a higher hurdle.

Jones also said the substitute amendment would include technical language from the Association of County Commissions of Alabama regarding the local portion of the grocery tax.

Alabama is one of a few states that still taxes groceries at the state's full sales tax rate. 

There are two legislative days left in the session. If the bill is amended, it will be sent back to the House for their consideration.

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