A growing number of states have cut grocery taxes to relieve working Americans struggling with runaway inflation.
Five of the 13 states that taxed groceries last year — Kansas, Idaho, Illinois, Tennessee and Virginia — have since passed laws reducing their cut from supermarket transactions. That cut ranges from 4% to 7%, depending on the state.
Taxing food as prices rise creates unfair burdens for Americans who spend larger shares of their income on groceries, according to the food industry association FMI.
“Grocery taxes are fundamentally bad public policy because they disproportionately impact lower-income families,” Andy Harig, an FMI vice president, told The Washington Times. “More than three-quarters of states have now refused to tax groceries, and we are hopeful additional states will follow suit to provide families with much-needed relief.”
As costs for food soar higher and faster than other items, lawmakers have increasingly clashed over repealing grocery taxes to relieve inflationary pain.
Virginia Gov. Glenn Youngkin, a Republican, signed a bill last year to abolish the 2.5% grocery tax, fulfilling a campaign promise. This month, state Senate Democrats killed a GOP effort to repeal the local part of the tax, arguing that some towns may need the revenue.
Consumer prices for food rose 11.8% during the 12 months ending in December, according to the most recent data from the Bureau of Labor Statistics. By comparison, consumer prices for all items rose 6.5% over the same period.
Some free market advocates say the rising costs offer the perfect opportunity to eliminate all food taxes — including sales taxes targeting “unhealthy” sodas, snacks and candy bars.
“Free markets are the best solution to rising food prices,” said Michael Warder, a California-based business consultant and former vice chancellor at Pepperdine University. “Government is inherently ham-handed picking winners and losers.”
Last year in Kansas, Democrats led a bipartisan push to eliminate their state’s 6.5% sales tax but had to compromise with Republicans who wanted to phase it out more gradually. They ended up cutting the sales tax on food to 4%.
“Politicians dealing with inflation by a lower grocery sales tax is like trying to put out a fire with a glass of water,” said Michael Austin, a former chief economic adviser to two Kansas governors and economist at the National Center for Public Policy Research’s Project 21. “If state policymakers want to make a real difference, they should stop tinkering with sales taxes and make a splash by dropping the overall sales or income tax rates.”
Efforts to cut grocery taxes have stalled for similar reasons in the other eight states that have them — Alabama, Arkansas, Hawaii, Mississippi, Missouri, Oklahoma, South Dakota and Utah.
South Dakota Gov. Kristi Noem, a Republican, made a campaign promise to repeal the 4.5% grocery tax. Her fellow Republicans in the Legislature have proposed cutting sales and property taxes instead, arguing they affect more people.
South Dakota is one of three states that tax groceries at the rate of other sales, according to the nonprofit Tax Foundation.
Cutting state grocery taxes to reduce inflation is a “pure wealth transfer” with few long-term benefits, said Sam Kain, a finance instructor at Walsh College in Michigan.
“Those paying less sales tax benefit, but eventually their community will raise those taxes,” Mr. Kain said in an email. “In the interim, the feds are pushing the burden of inflation onto the states. It’s bad all the way around.”
Most states do not tax groceries and are unlikely to do so anytime soon.
But in addition to the 13 states that do, others tax selected food products.
For example, Connecticut does not levy a sales tax on all groceries but targets prepared food items like oven-roasted chickens. In 2019, Democratic Gov. Ned Lamont signed a law raising the tax on restaurant food and other prepared meals from 6.35% to 7.35%.
Reducing grocery taxes will “ease the burdens of food inflation on all households” in the short term, said James Mohs, an accounting and taxation professor at the University of New Haven.
“The impact would be determined based on the income level,” Mr. Mohs said in an email. “Unfortunately, like the suspension of the gas tax in many states this may only be a temporary solution which will soften the blow at the checkout until the price inflation abates.”