Bill Description: House Bill 509 would increase the grocery tax credit by $20.
Analyst Note: 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, starting with the fact that Idahoans are forced to wait up to a year or more to recoup the taxes charged to them on groceries. Additionally, the credit is an approximation, at best, which results in some Idahoans receiving far less than they paid and others receiving far more. 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. Another flaw is that food stamp recipients are not supposed to claim the grocery tax credit, but no system exists to verify that tax filers who claim the credit aren't also receiving food stamps. Despite these and other problems, the Legislature continues to stall on repealing the sales tax on groceries and is instead considering increasing the grocery tax credit.
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?
House Bill 509 would amend Section 63-3024A, Idaho Code, to increase the grocery tax credit by $20 annually. This increases the standard credit from $100 to $120, an increase of 20%. It also increases the senior credit from $120 to $140, or 16.7%. The current grocery tax credit amounts went into effect for tax year 2015.
Is this a tax reduction? The answer is no for at least two reasons. The first is that House Bill 509 would also amend Section 57-811, Idaho Code, to transfer up to $32 million from the tax relief fund to the general fund. This transfer is designed to offset any real tax relief the grocery tax credit increase might afford.
Additionally, according to the CPI inflation calculator provided by the U.S. Bureau of Labor Statistics, prices rose from December 2015 to December 2021 by 17.9%, which means this increase is little more than an inflation adjustment. In other words, increasing food prices have resulted in increased sales tax revenue, which should cover this tax credit increase without requiring the $32 million transfer from the tax relief fund.