Bill Description: House Bill 61 would increase the annual grocery tax credit by $35 per person under age 65 and by $15 per person age 65 or older, starting in tax year 2025. Alternatively, it would allow filers to itemize grocery expenses of up to $250 per person. 

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NOTE: The last time the income tax credit (ostensibly for grocery taxes paid) was increased was in 2022, with the credit set at $120 per individual in the household. This bill proposes to raise the credit to $155 per person, and possibly higher for taxpayers who take extraordinary accounting steps when reporting their income taxes. This bill promises up to $50 million in tax relief for FY2026. Since FY2022, grocery sales tax collections have gone from $338.5 million to $405.7 million projected for FY2026. This means grocery taxes will be up by $67.2 million per year. Therefore, the increase in the income tax credit falls short of the increase in taxes being paid by $17.2 million per year, and the gap will only worsen over time. A $50 million credit would neutralize up to a 14.7% increase in the grocery tax collections from FY2022, but the tax collections went up by 19.8%. The proposed increase in the credit is not sufficient to cover the increases in grocery tax obligations over the period. Idahoans are not made whole.

Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?

The grocery tax credit is a refundable state income tax credit designed to approximately refund Idahoans the sales tax charged to them on groceries. This is a flawed concept for numerous reasons. It forces Idahoans to wait up to a year or more to recoup the taxes charged to them on groceries, for starters. Additionally, the credit has always been an approximation, at best, which results in some Idahoans receiving far less than they paid and others receiving far more. 

According to estimates from the state tax commission, at least 80,000 Idahoans who are not required to file an income tax return do so solely to receive the grocery tax credit, requiring thousands of hours of work from Idaho citizens and state employees. 

Despite these and other problems, the Legislature retains and periodically increases the grocery tax credit rather than repeal the sales tax on groceries. 

House Bill 61 would amend Section 63-3024A, Idaho Code, to increase the annual grocery tax credit to $155 per person starting in tax year 2025. This is an increase of $35 for individuals under age 65 and an increase of $15 per person age 65 or older.

Alternatively, a tax filer could choose to itemize grocery expenses of up to $250 per person. With a maximum benefit of just $95, it seems unlikely that many Idahoans would choose to invest the time required to conduct extensive recordkeeping. 

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Does it increase government spending (for objectionable purposes) or debt? Conversely, does it decrease government spending or debt?

The itemization option created by House Bill 61 would further complicate the process and increase the cost of filing taxes, both for the individual and the state tax commission. The process wouldn't be on the honor system; it would require submitting "scanned copies of sales tax receipts of qualifying food purchases along with the tax return or application."

The bill also calls for the tax commission to engage in a high level of enforcement, saying, "If a taxpayer misrepresents the amount of sales tax paid on food purchases on such taxpayer's tax return or application, the amounts that were improperly claimed shall be subject to recovery by the state tax commission." And taxpayers who misrepresent the amount of sales tax paid on food purchases "shall be subject to the penalties provided in sections 63-3046 and 63-3075(b), Idaho Code."

The bill would require the taxpayer to determine what food was eligible for the credit based on the "definition as provided in 7 U.S.C. 2012 as that section existed on January 1, 2025." 

Eligible groceries would exclude any "preparation of sugar, honey, or other natural or artificial sweeteners combined with chocolate, fruits, nuts, or other ingredients or flavorings in the form of confections, bars, drops, or pieces" unless it "contains more than ten percent (10%) flour by weight or requires refrigeration."

Eligible groceries would also exclude "any nonalcoholic beverage that contains natural or artificial sweeteners" unless the beverage contains "milk or milk substitutes, greater than fifty percent (50%) of vegetable or fruit juice by volume" or requires "preparation before consumption, such as powders or concentrates."

Are taxpayers really expected to remember the exact percentages of flour by weight and fruit juice by volume of the groceries they buy? Is the tax commission supposed to determine these things from a scanned receipt?

It would be more efficient to simply repeal the sales tax on groceries so Idahoans receive immediate tax relief and don't have to hoard receipts and risk penalties for incorrectly remembering ingredient proportions.

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