Idaho is one of seven states that apply the general sales tax to groceries. Five of those seven states have substantially lower general sales tax rates; they range from 4 to 4.5 percent. Six other states tax groceries at a lower rate than the general sales tax, ranging from 1 to 5 percent, averaging just over 2 percent (all data from the Tax Foundation).
It is true that Idaho provides a tax credit, after you file, to offset the tax on groceries. Let’s make abandoning the tax credit and eliminating the sales tax on groceries the first steps toward reforming Idaho’s tax code.
Idaho’s state and local tax structure relies largely on income, sales and property taxes to generate revenue. Idaho’s top marginal rate of 7.4 percent is also higher than adjacent states, with the exception of Oregon, which has no sales tax. Idaho has seven brackets with the top bracket of 7.4 percent applying to individual incomes greater than $10,567. It can’t be said, then, that the general sales tax on groceries is a trade-off for low income taxes.
Tax reform can be an onerous process so starting with something simple and broadly beneficial, like eliminating the sales tax on groceries, makes sense.
After this first step, a broader overhaul of the state’s tax structure should be considered. Making the tax system fairer and more competitive with adjacent states is something all Idahoans can support.