It is time for the Legislature to pass legislation to eliminate Idaho’s regressive sales tax on groceries.
Here are some facts that must be considered:
First, no one knows for certain what the effect would be on state tax revenues. This is because sales tax collections on groceries are not reported separately to the Idaho Tax Commission. Therefore, figures on groceries’ contribution to total sales tax revenues rely on indirect estimates, not direct data. Many people have taken for granted the 15 percent figure used by Gov. Otter when he calculated that the state would lose $80 million in revenues for fiscal year 2019. But there is reason to believe that this percentage is much less than 15 percent. Recent studies have shown that groceries may contribute as little as 8 or 9 percent to total sales revenues. Elimination of the grocery tax, paired with repeal of the grocery-tax credit, may therefore have a negligible fiscal impact.
Second, like all sales taxes, taxing groceries is regressive. This means taxes on food take relatively more from the pockets of low-income Idahoans than from high-income Idahoans. We often hear that the grocery-tax credit reimburses low-income families as much or even more than they pay out in grocery taxes. This is not true for families with older children, who cost more to feed. And it is certainly not true for families receiving Supplemental Nutrition Assistance Program (SNAP, “food stamp”) benefits. SNAP participants are only eligible to receive this tax credit for months when they are not receiving SNAP benefits. Since SNAP is not intended to cover a participant’s entire grocery expenses, SNAP recipients pay taxes on the rest of their groceries while receiving no offsetting tax credit.
There are other flaws with the system of taxing groceries. But the essential point is that previous defenses of the grocery sales tax have relied on debatable estimates, erroneous assumptions and misunderstandings. And, no, the grocery-tax credit does not protect the most vulnerable Idahoans from harm.
Taxing food places an unfair burden on working Idahoans, especially those who struggle for financial security and food security. The grocery sales tax places too great a financial burden on the people who have the least to give. Exempting groceries from the sales tax would remove this inequity. Instead of using general fund revenue losses as an excuse to ignore meaningful tax reform, lawmakers in the 2019 session must prioritize grocery-tax exemption as the foundation to frame a fair tax structure for the future.
Julia Page, Idaho Grocery Tax Coalition