We have yet another reason why state lawmakers should repeal the grocery tax this winter: State tax auditors have no real way to know whether the people who claim the grocery tax credit on their tax returns are eligible for it. Turns out, the grocery-tax credit fraud that was supposedly stamped out a couple of years ago never was.
The grocery tax credit gives most Idahoans a $100-per-person credit when they file their tax returns. Seniors get a little bit more (for some odd reason). The credit is intended to let the state have it both ways; it allows the state to apply a six percent sales tax to food sales, but then reimburse people, when they file their income tax returns, for having paid sales tax on their groceries. Defenders of the policy contend the tax captures revenues from those who might otherwise withhold their dollars from the state, primarily tourists and tax scofflaws.
However, those who use food stamps to buy their groceries don’t pay the sales tax, and therefore are not supposed to receive the grocery tax credit. Still, it’s known that people who aren’t supposed to receive the grocery tax credit still try to claim it.
The fact that the grocery tax credit is claimed either inaccurately or fraudulently has been an ongoing gripe about the state’s tax policy. That’s why the 2015 Legislature passed a bill to allow the state Department of Health and Welfare to share its food stamp enrollment data with the state Tax Commission. At the time, lawmakers believed such a sharing of information would prevent erroneously-claimed tax credits. Lawmakers estimated the data sharing would save taxpayers $146,000, the equivalent of preventing about 14,600 inaccurately-applied tax credits.
But it turns out, the federal government has objected, and the information about food stamp users isn’t being shared. The state Department of Health and Welfare recently confirmed, the feds said sharing food stamp enrollment data violates food stamp privacy rules.
The state Tax Commission, unsurprisingly, downplays the importance of this, but acknowledges, “Because we can’t exchange information with Health & Welfare, we don’t have an easy way to know this information. Our sources are limited, so we do what we can with the resources we have,” said commission spokesperson Renee Eymann.
Thus, Eymann said, the commission resorts to its usual routine. If an Idahoan claims the credit and state tax auditors think it was claimed incorrectly, the agency “would follow up and ask the taxpayer questions about it.” To which the taxpayer would either have to volunteer that they were on food stamps or an auditor would have to find another way to figure it out. Note that the return-on-investment for such an endeavor—sending out tax auditors to look for inappropriately-claimed $100 grocery tax credits—isn’t all that great.
Idaho should do what most other states have already done. Instead of going through the mechanics of taxing people on their groceries, then giving the money back, as part of their income tax filings, Idaho should simply make groceries exempt from the sales tax. The Idaho Freedom Foundation has said this for years. Now we have one more reason to make that happen.