Idaho Gov. Jim Risch says he has a secret plan to eliminate the sales tax on groceries, but he already has opposition from a key player – Governor-elect Butch Otter. Otter, who was elected Tuesday to be Idaho's next governor, said he favors a targeted tax break instead that would give the relief to low-income people who need it – not to the wealthy or out-of-state visitors. That could be done through a modified and much-expanded grocery tax credit on Idaho income tax returns, Otter said.
"There, No. 1, you hit residents, and No. 2, more importantly, you hit the people that really need it," Otter said. Himself a millionaire, Otter said, "I'll admit, giving me the tax relief on food – I would rather see that tax relief that I'd pay on food go to education. … Don't forget – when you give it up, you give it up for everybody." Otter asked, "Why do we want to give relief? Because we don't want something as essential as food being a decision that these folks have to make between something else."
Idaho currently gives a $20 per person annual grocery tax credit to residents, $35 for those 65 or older. That clearly doesn't make up for all the sales tax Idahoans pay on food in a year, and the credit wasn't increased when the Legislature, at Risch's urging, raised the sales tax from 5 percent to 6 percent in August to fund property tax relief.
Removing the sales tax from groceries entirely would cost the state $160 million a year in tax revenue.
Risch said this week, "I prefer completely eliminating it. There are others who prefer doing it as a credit on the income tax. There are arguments for and against each, and I'm working on it." Risch, whose seven-month term as governor will end when Otter takes over in January and Risch returns to the lieutenant governor's office, said, "I'm not going to go into details now, but I don't think it's any secret that our economy is growing incredibly well. … I have what I think is an innovative idea that will do it without increasing taxes."
Economists say eliminating the sales tax on groceries actually would give a bigger tax break to the wealthy than to the poor, because they tend to spend more on food by buying pricier groceries. "Taking the sales tax off food is expensive, and it's not targeted toward lower-income families," said economist Judy Brown, head of the Moscow-based Idaho Center on Budget and Tax Policy.
Otter said, "I think in order to hit the folks that need the relief, you almost have to base it on the income." He said, "The bottom line is what happens to people. If the average income in Idaho were $100,000, do you think anybody would be talking about giving 'em tax relief on food if we needed the money for education and other essential government services? No. The reason we're talking about it is we want to get that tax relief to the people that need it – those people on fixed income, those people that are in the lower income brackets that are working today, trying to raise kids."
Idaho is one of nine states that fully tax groceries, while six other states tax groceries at a reduced rate. Thirty states, including Washington, and the District of Columbia exempt groceries from the sales tax entirely. Idaho is one of five states that offer a grocery tax credit.