Point/Counterpoint: Idaho’s Grocery Tax Must Go

This editorial in favor of eliminating the sales tax on groceries was submitted by Bryan Smith, the national committeeman for the Idaho GOP. Click here to read the counterpoint.

I’m very surprised that you are “divided on the issue” of grocery sales tax repeal. I’ll give you the benefit of the doubt that you say you are divided so that you don’t taint the responses to your article. In any event, Idaho is only one of 12 states to tax groceries. It used to be 13, but in May 2024, even liberal Illinois repealed its 1% sales tax on groceries. So now, 38 states do not tax groceries. What do we know in Idaho that 38 other states don’t know? Nothing.

And Idaho is the only state with a scheme to tax groceries, and then have government redistribute that money back to tax filers via a rebate. No other state has a grocery tax credit. Only Idaho. If giving our money to the government and getting a redistributive share back were such a great idea, then we should just give all our money to the government and let bureaucrats divvy up the money. Believe me, they’d be happy to do it. In what world does it make sense to give the government our money, let government sit on it, we lose interest on the money, and then pay bureaucrats to send our money back to us in amounts more or less than we gave the government in the first place? It is a stupid system. If space aliens appeared and saw what we’re doing, they’d report back there was no intelligent life in Idaho.

Your article covered the basics about the grocery tax issue. However, you did leave out one important point. People on “food stamps” or “SNAP” do not pay sales tax on their groceries. Although they are not supposed to check the box and seek the tax rebate when filing their Idaho tax returns, many of them do it. And there is no enforcement mechanism. The point is that many people don’t pay any sales tax on their food, so others pay it for them. And to make matters worse, those people not paying can get the credit and do get the credit. In fact, we pay bureaucrats to send them our money to rebate grocery sales taxes they never paid in the first place. No, just how stupid is that?

You mentioned that Jim Rice said a poll showed cutting sales tax was a distant third to cutting income and property taxes. That’s the wrong question. I would bet that the poll would show 75-80% of respondents would want to “repeal grocery sales tax” specifically rather than “cut sales tax generally.” This is what politicians do who love to tax our stuff. They ask the wrong question to justify their position. It’s like a magician’s slight-of-hand. But if you ask people about repealing the grocery sales tax, it gets overwhelming support. I had one lady tell me, “I support repealing the grocery sales tax because I’m in favor of putting more food in children’s stomachs.”

Chris Cargill of the Mountain States Policy Center misses the point too. It may be true that sales taxes are more stable and pro-growth than other forms of taxation. However, that’s not the question. The question is whether groceries should be subject to a sales tax at all. For example, we do not tax services at all. Farmers do not pay taxes on agricultural goods they buy for agricultural purposes at all. There are lots of sales tax exemptions. We could use Chris Cargill’s argument to support taxing many currently exempt items with sales taxes. But we don’t because of other reasons we call public policy. The point is that groceries should be exempted from taxation just like many other things are exempt from sales tax.

I too have heard Mike Moyle and even former Speaker Scott Bedke raise the ridiculous argument that eliminating the grocery sales tax would cause grocery stores to raise their prices by 6%. This argument shows that Moyle and Bedke don’t understand free markets. Grocery stores make a profit selling food right now; otherwise, they wouldn’t be in business. And they don’t get any of the sales tax. If groceries are no longer taxed, grocery stores continue to make the very same profit. If they raised their prices 6% , then another grocery store would say, “I can make the same profit if I don’t raise my prices 6%. In fact, I can make more money because consumers will buy more from me rather than pay an extra 6% at the Moyle/Bedke grocery store. The Moyle/Bedke grocery store would go out of business if their prices were 6% higher than everyone else.” Competition would force grocery stores to not charge the 6%.

You have proven than the grocery sales tax rebate misses the mark because you get more back in rebate than you would in tax savings. However, as you note, this means others are subsidizing your groceries. Sorry Brian, but you are, in fact, an indirect welfare recipient! The government shouldn’t be subsidizing food purchases. The fact is that applying a rebate scheme will always miss the mark because some people will get too much rebate and others will get too little rebate. It is an arbitrary and imprecise system. Not taxing groceries at all would solve this problem.

The legislature could easily come up with definitions on what qualifies as a food to be tax exempt. It might not be a perfect system given how people define stuff, but I’d bet the legislature could get it right 95% of the time. Having to define what foods are exempt from tax is not a valid reason to throw the baby out with the bath water.

A couple of years ago, the Idaho Freedom Foundation went to Ontario Oregon and made a video recording of the cars in the parking lot. It was shocking to see so many Idaho license plates in Ontario. Interviews with people proved that Idahoans traveled from Idaho to Ontario to buy groceries. That loses economic activity for Idaho.

Repealing the grocery sales tax is not a close call at all. Of the 12 states that tax groceries, Idaho is the second highest at 6% only behind Mississippi at 7%. Several other states that still tax groceries are at 1%. For some people, a 6% tax on food means the difference between two gallons of milk or just one quart at a weekly trip to the grocery store. So, for me, it is very simple and obvious: A person should not have to pay tax to eat at the family dinner table. Idaho should repeal the grocery sales tax and make it a top priority especially as people suffer during Bidenflation that has caused groceries to skyrocket.