Beginning in 1965, Idaho has had a sales tax on all consumer goods, including groceries. Since then, a “food tax credit” has been created and increased several times to offset the burden of paying sales taxes on groceries. The tax-and-credit system is flawed in many ways, and Idaho taxpayers are hurt by it in equally many ways. In 2017, a bill to repeal taxes on groceries (and the tax credit) was passed, then vetoed, and Idahoans have kept paying: $2.1 billion paid since 2017.
It is time to axe the tax on groceries, and here are 12 solid reasons why:
1. Grocery taxes feed big government: Don’t buy the argument of “how will we replace the lost tax revenue?” The simple answer is to cut spending because government is over-bloated, and net grocery taxes make up less than 1.2% of total spending in the state. Supporters of the grocery tax cannot avoid the truth that they care far more about government taking money than they do about families keeping money, especially in this era of soaring food prices and expensive housing.
2. Grocery taxes are unpopular: The most recent polls on Grocery Taxes by Boise State University and Rasmussen (via the Mountain States Policy Center) show Idahoans favor repealing the tax on food at 74% in 2018 (BSU) and 87% in 2024 (MSPC), so repeal — already a popular idea — appears to be gaining in popularity.
3. Grocery taxes are outdated: Idaho is a laggard. It fully taxes food even though most states don’t. Idaho began taxing food sales 60 years ago. While some states never taxed any consumer goods, other states exempted groceries from their sales taxes. Over the years, states have moved to exempt groceries from sales tax. Today, only four states fully tax groceries, and another four partially tax them. It’s outrageous how Idaho stubbornly fully taxes food while 46 other states don’t.
4. Grocery taxes and credits are unfair: Many families receive food tax credits exceeding the amounts they paid for grocery taxes. Other families receive credits that fall short of the taxes they paid. Still other families get the full credit despite paying nothing in grocery taxes because they shop in other states like Oregon or Washington. It’s only by happenstance that any family is the “average family,” getting back exactly what they paid. It is an unfair tax-and-credit system where nearly all families are either winners or losers. The grocery tax system in Idaho is clunky and unfair.
5. Grocery taxes are inefficient: The sales tax on groceries is costly to collect (requiring audits, oversight, paperwork, etc.), requires people to apply for the credit on their tax forms, and burdens the state to oversee and administer the tax and credits. Every transfer of money (tax and credit) has a transaction cost. The tax, the accounting, and the payment of credits are all costly. It would be far easier for Idahoans to not pay the tax and then have to beg for the credit.
6. Grocery taxes hurt families: All taxes hurt those who pay them. Taxes on necessities hurt poor families most because they pay a larger percentage of their income on necessities than other families do. Taxes on food also magnify the impact of inflation on families because, as food prices go up, the taxes on those payments increase as well. It’s a double-whammy.
7. Grocery tax credits don’t keep up: Idaho families in 2024 paid $364 million in grocery taxes, but got only $183 million distributed back in credits — about half the amount paid. This year, with the new and higher tax credit, we estimate families will pay $406 million in taxes, but get only $251 million in credits, so families are still out to the tune of $155 million. Even with the tax credit increase, families are still net losers in the tax and credit scheme.
8. Grocery taxes and credits are dumb policy: How ridiculous is it that government collects a tax, says “it doesn’t really want your money,” then holds onto it for months until tax reporting season, waits for you to beg for it, and then gives only a portion of it back? Why not just make it so Idahoans don’t pay the tax in the first place? We have the capability to exclude groceries; we can fix this.
9. Grocery tax advocates use red-herring arguments: Supporters of the onerous grocery tax point to it as a way to force tourists and illegal immigrants into paying some taxes. First of all, how awful is it to support an expensive and harmful tax on Idaho families just to bilk a few dollars from some groups you want to target? Second, those groups don’t pay much in this tax anyway. At most, tourists pay 4% of the $406 million total taxes collected, and immigrants pay barely over 1%. Remember, tourists pay tons of other taxes in Idaho (gasoline, hotel, restaurant, goods, recreation, etc.). There is no need for a complicated system that hurts all of Idaho just to garner a few extra dollars from tourists. As for illegal immigrants, they shouldn’t be here anyway. We should never support a tax policy that makes Idaho government even slightly dependent on taxes paid by illegal immigrants because then the government lacks the incentive to expel them.
10. Grocery taxes aren’t even a thing in other states: Five of Idaho’s neighboring states have zero tax on food, and Utah has a drastically lower tax on food. And don’t forget the hidden cost to Idaho of having a tax while neighbors don’t: Idaho loses other profits and tax money as people go to Oregon and Washington for groceries and other things they could buy in Idaho instead.
11. Grocery tax repeal is not the enemy of property tax repeal: You might hear some politicians disingenuously play grocery tax repeal against property tax reform. None of them has plans to reduce or repeal property taxes. They just use them as a false trade-off to repealing grocery taxes. And, more importantly, Idaho can do both! Repeal the tax on groceries and enact the roadmap to repeal all property taxes in Idaho.
12. Grocery tax repeal works: The plan to repeal grocery taxes only affects state tax collections, and the other sales taxes are reallocated precisely to keep cities’ and counties’ state tax distributions unchanged. It’s easy to exclude groceries from taxes because stores already do it for federal food subsidy recipients — no new “programming” is needed. There are no technical roadblocks to getting it done.
Conclusion, do it already!: Legislative leadership should allow a vote, the Legislature should repeal the grocery tax, and the governor should sign it. Save Idaho the expense and the battle of collecting signatures, running a ballot initiative, and making Idaho, yet again, the battlefield for a lot of out-of-state money and interests trying to manipulate Idaho policy. Do what the people want!
