Fact Sheet

Untax groceries and protect funding for Alabama’s public schools

The sales tax on groceries is a cruel tax on survival. It drives struggling people deeper into poverty. Here’s why Alabama should end this tax – and how to do it:

  • Alabama is one of only three states with no tax break on groceries.
  • The state grocery tax is 4%, equal to two weeks’ worth of groceries each year.
  • Alabama should untax groceries quickly and responsibly. That means ending the state grocery tax now, not over several years. And it means replacing that lost revenue for education in a way that doesn’t harm struggling families.
  • Alabama can protect education funding by limiting or ending its state income tax deduction for federal income taxes (FIT). The FIT deduction is a skewed tax loophole that overwhelmingly benefits rich households.

Two promising ideas have emerged to untax groceries and protect education funding by closing the FIT loophole. Both plans would be a significant tax cut for a large majority of Alabamians:

  • The best approach would be to end the state grocery tax and eliminate the FIT deduction on both corporate and individual income taxes. This plan would replace the grocery tax revenue and raise more than $400 million a year for Alabama’s underfunded public schools.
  • Another proposal would end the state grocery tax and cap the FIT deduction. This plan would replace the grocery tax revenue but would not raise any additional money for public schools.

Bottom line

Untaxing groceries quickly and responsibly would boost economic security for all Alabamians. By closing the FIT loophole, our state could make life better for families and protect funding for public schools.