A bill to eliminate the state grocery tax in Alabama may still have a chance in the Alabama legislature, albeit a small one.
Many citizens in Alabama pay a seven, eight, even 10% tax on all of their food. Four percent of that is state sales tax. The rest is county, city, and school district taxes.
Some legislators are concerned about replacing grocery tax revenue, which goes to both the education and general fund budgets.
In December of 2021, State Rep. Mike Holmes (R-Wetumpka) announced he would be introducing House Bill 174 (HB174) to get rid of the state tax on groceries. Holmes said that his legislation eliminates just the state tax on groceries. The existing city, county, and school district sales taxes would be unaffected.
Since the start of the COVID–19 pandemic, prices for virtually everything have increased. Issues with the global supply chain and inflation have only made this worse. Legislators say cutting the grocery tax would give families in Alabama much-needed relief.
Holmes is serving out his last regular session in the House since he is not seeking reelection in the upcoming election.
“They’ve got so much money, they’re just floating in money,” Holmes said. "We are floating in money; we’ve paid off most if not all of our debt. When I first got here, we were borrowing money like a drunken sailor from our Rainy-Day Funds, and we wind up owing $600 million. We’ve got that paid back."
Holmes stated that the bill is “stuck” in the Ways and Means Education Committee with no resolution in sight. The bill has yet to be put on the committee agenda. The newly released budget could influence the bill with the state continuing to develop a surplus.
“If we don’t get it on there next week, we’re probably not going to get it on there,” Holmes said. “I haven’t been able to get it on the agenda, and I think our window is small. Today I talked to the Chairman [Rep. Danny Garrett (R-Trussville)] at length, he asked a couple of questions, and I talked to him for a while until he didn’t have any more questions.”
Holmes believes the surplus in funds available to the state will be sufficient to address the money lost due to the proposed tax cuts. In January, he also told 1819 News that he would not seek to make up the balance of lost funds. Instead, he would seek to make up the deficit with spending cuts.
“My colleagues tell me every day, ‘I’m getting a lot of phone calls, a lot of emails about this grocery tax bill,’” Holmes said. "I ask if they are all positive and they say, ‘oh yeah.”
Holmes and others have stated that the hesitancy to pass the bill comes because of the drop in state income that would result from the tax cuts.
“All you’ve got to do is follow the money,” Holmes said. “Where they are opposing it is in the revenue department. They can’t see that hunk of money coming out of what they’re managing over there. They want absolute control.”
Rep. Kenneth Paschal (R–Pelham) has said that there are possibilities to get the bill into committee in this legislative session.
“The challenge is, how do you fill that gap? That’s the question,” Paschal said. "It’s a great idea, it’s needed. I don’t think you’ll find anyone that’s against it, but still, we’re talking about roughly $650 million. How are you going to fill that gap?”
Despite the widespread support for the bill, those within the Ways and Means Education Committee are attempting to reach a resolution on the appropriate means of introducing the bill. Ideas are being tossed around behind the scenes, and some have suggested introducing tax cuts gradually.
To connect with the author of this story, or to comment, email craig.monger@1819news.com.
