After state lawmakers approved — for the first time in generations — a cutback in the sales tax on groceries, cities like Daphne and beyond could be studying if they can also offer relief at the grocery check-out aisle.
Alabama’s existing tax structure relies heavily on the sales tax to fund government. And it’s more pronounced on the local level. According to the Tax Foundation – a Washington, D.C.-based think tank that studies U.S. tax policy –The sales tax on groceries is also a crucial funding source for small towns and cities that dominate Alabama’s landscape where few retailers are present aside from dollar stores and a grocery store.
In Birmingham, the sales tax rate on groceries is 10% broken down by 4% to the state, 4% to the city, 1% to Jefferson County and additional 1% special district tax. The remainder of the state’s overall 4 percent sales tax on food – which could be 2% by next fall – could also eventually come off. If the full 2% is removed, it could save a family of four around $300 a year in groceries, though Jones said it could be lower at around $200 to $250 a year. A joint study commission on grocery taxation,
Few cities are likely to study cutting their local sales tax cut. Tuscaloosa, however, plans to take a dive into the issue, according to Mayor Walt Maddox. He said in the coming weeks, the city attorney’s office and the CFO and budget team will provide an update analysis for consideration in the mayor’s fiscal year 2024 operating budget, which begins Oct. 1.
“We are a low tax state and we clearly have to make choices going forward with tax cut measures,” said state Rep. Danny Garrett, R-Trussville. “We have to look at how we tax people and what our tax polices are.”
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