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Alabama senator files tax rebate bill; plans bill to reduce grocery tax


Alabama senator files tax rebate bill; plans bill to reduce grocery tax

Mar 28, 2023 | 2:13 pm ET
By Jemma Stephenson
Alabama senator files tax rebate bill; plans bill to reduce grocery tax
The dome of the Alabama State Capitol in Montgomery, Alabama, as seen on January 24, 2023. (Brian Lyman/Alabama Reflector)

The Senate Finance and Taxation Education Chair has filed a bill on tax rebates on behalf of Gov. Kay Ivey.

But Sen. Arthur Orr, R-Decatur, said in an interview Monday it was “premature to say” whether the $400 rebate for individuals and $800 for couples would stick. 

“I think I’m very safe in saying it won’t be more, but it’s possible that number could decline,” he said.

The bill, SB86, would provide residents who filed taxes in 2021 a one-time rebate of $400. Married couples who filed jointly would receive $800.

Rep. Danny Garrett, R-Trussville, the chair of the House Ways and Means Education Committee, has introduced similar legislation in the House.

The rebates would cost the state nearly $1 billion, though both the Education Trust Fund and the General Fund saw record revenue growth last year. In her State of the State address on March 7, Ivey called for the rebates, saying it was “people’s money.”

“It’s only right, while still acknowledging we are recording revenues far exceeding normal and sustainable levels, we give a fair share of this money directly back to the people of Alabama,” Ivey said.

Gina Maiola, communications director for the Governor’s Office, said in a statement that the governor was “always open to ideas, discussions and solutions.”

“As she has said, the $400 and $800 rebates provide meaningful and immediate relief to working families right now,” the statement said.

The Alabama Department of Revenue would begin sending out checks no later than 90 days after the bill becomes law. The money would come from a surplus in the education budget.

Orr also plans to file a bill that reevaluates the grocery tax in Alabama. He said that he plans to meet with other senators to get their input.

“I believe the bill that I’m proposing is the best pathway forward but I’m one of 35,” he said. “Of course, you have the House to consider, as well.”

Alabama is one of 13 states that taxes groceries, and just one of three that fully taxes food. With local levies, customers can pay 10% tax on the food they buy. Talk of repealing the tax has gathered momentum this year.

Orr said that his grocery tax bill would apply to groceries covered under “Women, Infants and Children,” or “WIC,” which is a supplemental food program for those who meet eligibility requirements

Orr said that the grocery plan would impact around $250 million in the education budget, and it has a provision if the economy or revenue declines. Orr said there’s also a provision so that local governments can’t replace the removed state taxes.

“They can’t come back, backfill for their own coffers at the local level,” he said.

Grocery taxes go towards the Education Trust Fund Budget.

When asked if there were plans to look again at how education is funded in Alabama, Orr said that he has a “caution” in doing so now even though they have been re-evaluated in the past.

Orr said that, when he looks at economic forecasts for the coming months, it’s not positive. Education revenues come from income taxes and sales taxes which could “decline precipitously,” he said.

“So, while we want to help Alabamians with their tax burden, or also with the rebate, I think, well, it’s incumbent upon us to move with caution and be very careful when we talk about reducing revenues for education,” he said.