Idaho is one of only 13 states that still taxes groceries, and the Gem State has one of the highest rates at a full 6% (the state’s current sales tax). Montana doesn’t have a sales tax, while Wyoming exempts food and Washington does not attach its sales tax to most grocery items.
In Utah, residents are currently charged 3% on groceries statewide, but lawmakers have proposed eliminating the state portion of the tax (currently 1.75%) via a ballot measure in November of 2024.
Taxing food is controversial. Idaho offers a yearly rebate of $100-$120 to residents – a number that appears smaller as inflation roars.
In 2017, then Idaho Lt. Governor Brad Little urged Governor Butch Otter to sign a proposed repeal of the state’s grocery tax. Other candidates and political leaders have called for a similar reduction or repeal, assuming that it would have a progressive effect. Instead of repealing or exempting the tax for all, grocery tax credits or rebates offer low income households better savings.
Research from the Tax Foundation concludes:
“Grocery exemptions are a middle -income, not a low -income, benefit—and middle earners can be more efficiently made whole through grocery tax credits. Higher earning households purchase not only more, but higher qualities of, groceries. Low-income households, in fact, are more likely to purchase taxable substitutes to what states classify as groceries, a category that traditionally only covers unprepared foods.
The result is that a household in the fifth decile spends almost 70 percent more than a household in the first decile, and a household in the top decile spends over three times as much as a household in the lowest. The distributional effects of grocery taxation diverge sharply from most policymakers’ expectations, which has dramatic ramifications for this ongoing debate and suggests better ways to achieve policymakers’ desired aims.”
Sales taxes are more stable and pro-growth than other forms of taxation – especially income taxes. Policymakers can better serve citizens by adopting higher yearly grocery tax rebates and focusing additional tax relief on reducing income taxes.