Food Sales Tax on States’ Chopping Blocks

By: - January 29, 2007 12:00 am

While most Americans pay no state sales tax on groceries, shoppers in Mississippi and Tennessee fork over to state tax collectors the equivalent of more than three weeks’ worth of foodstuffs a year.

With coffers full this year, several of the 15 states that still tax groceries, including Mississippi and Tennessee, are considering scrapping their cut at the cash register on sales on bread, milk and other staples. Three states cut or eliminated their food taxes last year.

Arkansas Gov. Mike Beebe, a Democrat, and Hawaii Gov. Linda Lingle, a Republican, both want to dump the sales tax on food. “No one should be taxed for buying basic food necessities,” Lingle said in a statement when she unveiled a comprehensive tax package Jan. 18.
Lingle and Beebe both bank on budget surpluses to fill the holes their proposals would make in their state budgets. Lingle wants to eliminate Hawaii’s 4 percent sales tax on food.  In his State of the State address, Beebe called it a “moral charge” to eventually rid the state of the tax, starting with halving the current 6 percent rate.
“Most states would rather not tax groceries,” said Nick Johnson, director of the State Fiscal Project of the Center on Budget and Policy Priorities , a group that tracks state policies that affect the poor. States that do tax food “are considered relics,” he said, but the tax can provide much-needed revenue.
Sales-tax exemptions generally apply to food purchased in grocery stores, not in restaurants. In addition to state sales taxes, some cities and localities also may tax food purchased in grocery stores and restaurants.
Idaho Gov. C.L. “Butch” Otter (R) said that he would like to do away with the state’s 5 percent sales tax on groceries but that the state simply can’t afford the $180 million revenue gap the repeal would cost. Instead the governor in his State of the State address proposed to let low-income Idahoans deduct $90 – up from $20 now – from their state income taxes. Besides Idaho, the states of Hawaii, Kansas, Oklahoma and South Dakota also offer such credits or rebates.
Sales taxes on groceries are regressive, meaning they take a larger percentage of the income of poor people than of wealthier people. “A cut in the grocery sales tax is a way to give direct assistance to the poor,” said Sujit CanagaRetna, a budget expert for the Council of State Governments.
A $1 billion budget surplus allowed Wyoming last year to temporarily repeal its 4 percent sales tax on food for the next two years, and lawmakers there are considering making the repeal permanent. Utah and South Carolina last year joined five other states that tax groceries at lower rates than other goods, both cutting their sales tax for food by 2 percent. “We saw a mini-trend on this last year,” said Bert Weisan, a fiscal expert for the National Conference of State Legislatures.
A more controversial proposal is brewing anew in Mississippi and Tennessee, where some lawmakers last year failed to convince their governors to lower the sales tax on groceries in exchange for hiking the tax on cigarettes. Mississippi and Tennessee have the country’s highest sales taxes on food at 7 percent and 6 percent respectively, and among the lowest taxes on cigarettes, just 18 cents and 20 cents a pack.
In Mississippi, a new push for a food tax-cigarette tax swap could provide election fodder for statehouse and gubernatorial races this year. In Tennessee, an alternate swap is being proposed: taxing pornography instead of food.
Mississippi Gov. Haley Barbour (R) flatly rejected any tax increase last year. “It is irresponsible to cut Mississippi’s budget revenue while we’re trying to recover from Hurricane Katrina,” Barbour said last January when he vetoed the bill.
A proposal is in the works this year from Mississippi Lt. Gov. Amy Tuck (R), who led the push in 2006. Tuck has said she does not plan to run for any statewide office this year. “The 20 senators who voted against the grocery sales tax cut will be hearing this on the stump from opponents,” David Hampton, editorial director of The Clarion-Ledger predicted last year.
In Tennessee, Gov. Phil Bredesen (D) plans to propose increasing the state’s 20-cents-a-pack cigarette tax. But he recently told The Associated Press that the move would not be linked with a decrease in the state’s 6 percent sales tax on groceries. Bredesen said that he’s “not ideologically opposed” to reducing the food tax, but that he has other spending priorities — especially in education and health care, the AP reported earlier this month.
The solution proposed by Tennessee state Rep. Stacey Campfield (R) is to get rid of the sales tax on food and replace the estimated $450 million a year in revenues with a tax on  pornography. Bredesen called the proposal “constitutionally suspect” but he said he’d be happy to discuss it.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.