Alabama Gov. Kay Ivey this week signed legislation to reduce Alabama’s sales tax on groceries.
The tax cut will reduce the state’s 4% tax on groceries to 3% on Sept. 1. The tax will drop to 2% on Sept. 1, 2024, but only if tax collections to the Education Trust Fund are projected to rise at least 3.5% to offset the loss. If the growth requirement isn’t met, it would be reduced to 2% in the next year that the growth requirement is satisfied.
“As Alabamians and Americans alike are grappling with tighter times, I am hopeful that this decision by the Legislature to slightly reduce the sales tax on certain food items will be truly felt by Alabama families,” Ivey said in a statement.
Alabama is one of only three states that tax groceries at the same rate as other purchases. Advocates had long argued that taxing food at such a rate placed an unfair burden on families in the poor Southern state, where 16% of the people live in poverty and the median household income hovers around $54,000.
Although Tennessee has a higher state sales tax rate on food at 4%, Tennessee’s tax on most non-prepared foods is below the 7% state tax on other purchases.