MONTGOMERY — Alabama shoppers won't be seeing a second penny cut from the grocery tax in 2024.
Lawmakers reduced the 4% sales tax rate on groceries by 1% last September.
Passed during the final days of the legislative session in 2023, the grocery tax cut law sponsored by State Rep. Danny Garrett (R-Trussville) and State Sen. Andrew Jones (R-Centre) dropped the state's sales tax on groceries by 1% on September 1 automatically. An additional 1% was set to be shaved off as soon as September 2024, 2025 or a later year if the state projected 3.5% growth in the Education Trust Fund (ETF) for the next fiscal year.
The average growth rate in the ETF annually is 3.6%, according to the Public Affairs Research Council of Alabama.
Kirk Fulford, Deputy Director of the Legislative Services Agency Fiscal Division, told members of the Joint Study Commission on Grocery Taxation on Monday both his agency and the Department of Finance were projecting less than 3.5% growth in the ETF in fiscal year 2025 starting on October 1.
Thus, absent a change to the law, Alabamians will have to wait until September 2025 at the earliest for another grocery tax cut.
"[The Department of Finance's projection] was less than ours and ours was a little less than 2%, so I think there's may have been closer to flat," Fulford said. "I do know that between the two they're not 3.5%."
Alabama Arise, a public policy nonprofit that supports eliminating the grocery tax, is recommending lawmakers amend the 2023 grocery tax cut law to drop the ETF growth requirement down to 2% to make it easier for the second penny to be cut from the grocery tax.
Jones told reporters on Monday time would tell if such a change is needed.
"I think we'll know more as we enter into the fall. Certainly, the fact the growth was so much smaller than anticipated this year around 2% or a little bit less than 2% there's a possibility in my mind that if we had a lower than average year that maybe next year we'll be at average or above and we know that 3.5% growth is the average which is why we set it at that in the bill. If we hit the 3.5% or above then we're good to go," Jones said. "In many ways, we're a victim of our own success. We've untaxed overtime pay. We're talking about spending $100 million on school choice. We're doing all these things to give back and have other tax breaks and those have impacted the growth rate of the ETF which means that we may delay the grocery tax cut. That's the way I would characterize it, a victim of our own success."
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