A series of four new tax cut bills introduced by State Rep. Danny Garrett (R-Trussville) are aimed at providing further financial relief to Alabama families.
These proposals, designed to lower the cost of living for residents, would significantly reduce taxes on food, retirement income, and state income taxes, with the potential to save Alabama families an estimated $314.6 million annually.
One of the proposals, HB386, seeks to accelerate the state’s grocery tax reduction by an additional 1%, bringing the total reduction to 2% by 2025.
Under current law, Alabama taxes food at a reduced rate of 3%. This bill would lower the rate to 2%, resulting in an additional $123 million in savings each year. Combined with the previous cuts, the total savings from the grocery tax reduction would reach approximately $246 million annually.
Garrett, who oversees Alabama’s nearly $10 billion education trust fund budget in the lower chamber, emphasized that this tax reduction is a major step toward easing the financial burden on Alabama families, especially given the rising costs of food.
In addition to reducing the state’s grocery tax, HB387 aims to provide more flexibility to local governments in adjusting their food tax rates.
Under existing law, counties and municipalities are restricted from reducing their sales tax on food by more than 25% in any given year unless certain growth targets are met. This bill would remove that 25% limitation and the growth requirement, allowing local governments to make more substantial cuts to the grocery tax if they choose. This change would give cities and counties the ability to provide additional relief to residents in areas where local governments have the capacity to reduce taxes further.
Another proposal, HB388, targets retirement income. Under current law, the first $6,000 of taxable retirement income for individuals aged 65 and older is exempt from Alabama’s income taxes.
This bill seeks to double that exemption, raising the limit to $12,000. The proposed change would benefit retirees who rely on defined contribution retirement plans, such as 401(k)s and IRAs, by reducing their overall tax burden. It is estimated that the change would save Alabama retirees a total of $44.8 million annually. The move reflects the legislature’s ongoing efforts to support the state’s aging population, many of whom are living on fixed incomes.
Finally, HB389 focuses on reducing the overall state income tax burden for Alabama residents by increasing the income floor for the standard deduction and expanding the income threshold for the maximum dependent exemption.
These changes would help lower the amount of income subject to state taxes, benefiting middle-class and lower-income residents. It is estimated that the bill would provide a $23.8 million tax cut. By expanding the standard deduction, this measure would make it easier for more residents to reduce their taxable income and save money, further easing the financial pressures many families face.
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These bills are part of the Alabama Legislature’s ongoing efforts to provide tax relief to residents while maintaining fiscal responsibility. Since 2022, the legislature has passed a series of tax cuts aimed at making Alabama one of the most tax-friendly states in the nation.
Alabama Speaker of the House Nathaniel Ledbetter (R-Rainsville) commended colleagues’ continued commitment to tax relief, highlighting that these cuts have been achieved while maintaining strong fiscal discipline.
“The Legislature has passed over a dozen tax cuts since 2022, saving Alabama families thousands of dollars each year,” Speaker Ledbetter said.
“We’ve done this while paying off the state’s debt, fully funding reserve accounts, issuing $393 million in tax rebates, and cutting government waste. Alabama’s financial footing has never been stronger, and I’m proud that our responsible budgeting has allowed us to provide even more relief to our citizens.”
Grace Heim is a state and political reporter for Yellowhammer News. You can follow her on X @graceeheim or email her at [email protected].
