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Sales tax on groceries makes absolutely no sense

Sales tax on groceries makes absolutely no sense

by
Wayne Hoffman
October 3, 2014
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October 3, 2014

Idaho law makes it economically advantageous for poor people to get government help, and punishes those who don’t. Those who get government assistance—those who apply for and receive help in the form of food stamps—don’t pay sales tax when they buy groceries. Purchases made with food stamps are exempt from the sales tax. They leave the grocery store paying 6 percent less than everyone else.

Those who don’t use government assistance and use their own cash, checks or debt instruments to buy groceries are compelled to pay Idaho’s 6 percent sales tax.

This is one of the fundamental reasons why I believe it is important to eliminate the sales tax on groceries. Under Idaho’s very strange tax system, people who use government assistance are rewarded, and people who don’t are penalized. The people on government assistance can buy more and spend more on groceries than everyone else. That’s the straight-up experience at the grocery checkout counter.

But Idaho makes things even more complicated from there: Those familiar with Idaho’s sales and income tax law will point out that the state allows people, whether they’re rich or poor, to get their sales tax dollars back the following April when they file their state income taxes under what’s known as the grocery tax credit. The credit is $100 per person, or $120 for the elderly.

What that means is Idaho residents who really need access to their own money today are told to wait. You can think of this as a mandatory Christmas Club account that matures each spring. You’re required to participate, that is, unless you’re getting government assistance in the form of food stamps.

And, unlike your Christmas Club account, there’s a very real possibility you’ll end up with less money than when you started. For a family of four spending about $600 a month on groceries (an average amount, says the USDA), they’ll have $36 a month or $432 a year taken away from the family and handed to government accountants. What does the state of Idaho do with a family of four’s hard-earned $432? The state will give them back $400.

Eliminating the grocery tax credit and simply making groceries sales tax exempt for everyone would simplify the state’s tax code, stop the state from unnecessarily taking money from people only to give it back later and would very likely cost the state nothing to accomplish. It might even save money, because tax auditors would no longer have to figure out whether Idahoans are improperly applying for the grocery tax credit.

This proposal is generally supported by conservatives and liberals alike. We asked candidates for governor their position on the idea. Libertarian John Bujak and Democrat A.J. Balukoff said they were favorable to eliminating the tax on groceries. Gov. Butch Otter’s spokesman declined to say whether he would support it or not, which is too bad, because this is a pretty big deal.

There are a lot of things that the state of Idaho can do to make Idaho’s tax law fairer, rates lower and more predictable. There are a lot of things the state of Idaho can do to help Idahoans get ahead and stay ahead. This is just one, very important tax reform that would make Idaho a better place for all Idahoans, no matter what their income.

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