Alabama is one of only three states in the U.S. that tax groceries at the full state sales tax rate without any credit or rebate.
The state takes in roughly $500 million each year in state grocery taxes, while data from the USDA shows that 17% of adults and 23% of children in Alabama struggle with food insecurity—the fifth highest rate of food insecurity in the country.
To help residents cope with the rising price of food, the City of Clay in Jefferson County, Alabama, voted last week to cut its share of Alabama’s sales tax on groceries from 4% to 2%.
“I think we’ll have more people shopping at the Pig and Publix because of this,” Mayor Charles Webster told al.com. “People will come to our city to save a little money.”
Starting on November 1, shoppers at the Publix and Piggly Weekly in Clay will pay 8% instead of 10% in sales tax on fruits, vegetables, meat, bread, and other food items.
The tax reduction will expire on October 31, 2024.
Most states exempt groceries from their sales tax. Kansas and Virginia ended their state grocery taxes this year, leaving only 11 of the 45 states with a sales tax that still impose it on groceries.
Illinois also suspended its grocery tax for the fiscal year.
Except for Alabama, Mississippi, and South Dakota, the states that tax groceries offer a reduced rate for groceries or provide an offsetting grocery tax credit to help low-income families who spend a larger share of their income on food.
Families with annual incomes less than $20,800 pay almost eight times more as a share of their incomes in sales taxes than the top 1% of families, on average.
“Sales taxes on groceries have an especially harmful impact on income and racial inequities,” the Center on Budget and Policy Priorities reported in 2020, because “low-income families tend to spend a larger share of their income on groceries.”