On Tuesday, May 6th, Alabama legislators reached a consensus to lower the state sales tax on food and eliminate sales tax on essential items such as diapers, baby formula, and menstrual hygiene products. The Alabama Senate unanimously approved both pieces of legislation with a vote tally of 34-0. These measures are now set to be forwarded to Governor Kay Ivey for her endorsement.
The decision to reduce the food tax comes in response to concerns from lawmakers across party lines regarding the financial strain that escalating grocery prices are placing on families. If the legislation is enacted, the state sales tax on food will decrease from the current rate of 3% to 2%, with this change slated to take effect on September 1st, 2025. It is noteworthy that in 2023, lawmakers had already reduced the tax rate from 4% to 3%. Although an additional reduction of 2% was initially planned, it was dependent on budget growth that ultimately did not materialize. This tax cut is projected to result in a loss of approximately $121 million annually in revenue that would have otherwise contributed to the Education Trust Fund.
Advocates for low-income families, such as the leader of Alabama Arise, have expressed strong support for these changes, asserting that the grocery tax should be relegated to the “dustbin of history.” In addition to the food tax reduction, lawmakers also passed legislation that exempts baby formula, maternity clothing, diapers, and menstrual hygiene products from state sales tax. This exemption will extend to items like baby wipes, breast pumps, and bottles, and is expected to cost the state around $13 million each year in lost tax revenue.