There’s bound to be some sticker shock when you shop for your holiday meals this year. While the federal government claims inflation is subsiding, it still costs much more than it should for all the fixings.
Idaho is one of just 13 states that add to the pain with a sales tax on groceries. At a full 6%, the tax is higher than most. For every $100 you buy in groceries in Idaho, you pay $6 in tax.
But because the state offers a $120 per person rebate, a family of four could buy up to $8,000 per year in groceries and not have to pay a single dollar in tax. Out-of-staters pay the tax and don’t get a rebate.
Still, the grocery tax rebate is not indexed for inflation. As such, its value decreases each year.
Taxing food is not popular. And taxing work shouldn’t be either.
I would respectfully suggest that focusing exclusively on repealing the grocery tax takes our eye off a much bigger and even more important prize – reforming and lowering the state’s income tax.
Montana just announced plans to lower its income tax below 5%. Arizona has lowered its income tax below 3%. Utah’s income tax is just 4.65%. Many other states have lowered their income tax rates to be competitive.
At 5.8%, Idaho is quickly gaining a reputation of having one of the higher income tax rates in the nation. With a median household income in Idaho of $70,214, the total estimated state income tax liability for the average family is $4,072.
Meantime, the average family of four is spending roughly $250-300 per week on groceries. This means, on average, an Idaho family of four is paying about $15,600 per year on food, which equals a total grocery tax liability of $936. With the state’s grocery tax credit, the liability falls to $456 – or $38 per month.
A yearly grocery tax bill of more than $400 is still painful for many families, and we shouldn’t discount the plea for more relief. In fact, Idaho lawmakers should increase the state’s grocery tax rebate to keep up with inflation.
But the data shows that sales taxes are more stable and pro-growth than other forms of taxation – especially income taxes. And sales taxes are paid by a larger swath of the population. Income taxes, in contrast, are only paid by those who work in the state.
Idahoans would see more savings if policymakers would immediately reduce the state income tax and add a revenue trigger for further reductions.
Lawmakers could also then increase – perhaps even double – the state’s grocery tax rebate while indexing for inflation. This would still allow the state to collect the tax from those coming in from out of state, while reducing the burden on families in Idaho.
Putting all the focus on the grocery tax is small potatoes. State revenues are strong enough for the full meal deal.
