Proposal to cut tax on food killed

BOISE – Exempting food from Idaho’s sales tax and keeping the tax at 6 percent would lighten the burden on the poor and boost the state’s revenue, House and Senate Democrats argued Tuesday.

But a bill they brought to a House committee was abruptly killed without a hearing. Republicans said lawmakers and Gov. Dirk Kempthorne promised Idahoans the sales-tax increase from 5 percent to 6 percent would expire, which it’s set to do June 30.

“Our credibility is at stake,” said Rep. Dell Raybould, R-Rexburg. “Any bill that keeps the sales-tax increase isn’t the right step.”

While House Minority Leader Wendy Jaquet of Ketchum agreed with Raybould. She said the annual Boise State University public policy survey indicated the majority of Idahoans don’t care if the tax increase ends or not.

In fact, the survey, released early last month, noted that 63 percent of Idahoans believe the sales tax amount they pay is “about right.”

Rep. Elmer Martinez, D-Pocatello, one of three sponsors of the measure, told the House Revenue and Taxation Committee that most states don’t tax food and grocery sales.

“Families throughout Idaho continue to struggle,” he said. “This is a reasonable plan used in many states. … We are hindering the poor from the simple act of buying food.”

Idaho is one of just 14 states that fully tax food, according to a report by the Federation of Tax Administrators. Most states, including Washington, exempt groceries from sales taxes.

Though Republicans have sponsored similar legislation in past, the issue has been a legislative non-starter. This time around, many lawmakers on the committee said the timing wasn’t right.

“If I remember correctly, we were flush with cash last time we discussed it,” said Rep. Debbie Field, R-Boise. “That’s not the case now, and our concerns aren’t going away. I don’t think this is a good time to even have a hearing.”

The fact the state is strapped for money is exactly why the measure should be considered, said Rep. Nicole LeFavour, D-Boise.

“This raises additional revenue and meets all our needs,” she said. “Families are struggling. Food is the most essential item they buy. Let’s shift the tax to things that are less essential.”

The Legislature bumped up the sales tax to 6 percent in 2003 because of a budget shortfall. Bringing it back down to 5 percent would remove $180 million a year from the state budget. But Martinez said the state could gain nearly $28 million by keeping the sales tax at its current level and exempting food items.

“If you have less income, a bigger proportion goes to food,” said Rep. George Sayler, D-Coeur d’Alene, who supported the legislation along with three other Democrats on the panel. “Everybody benefits, and it makes our tax system a little less regressive.”

Under the proposal, the state would have partially offset the loss of revenue from taxing food by repealing the grocery income tax credit, according to Dan John, tax policy manager at the Idaho Tax Commission. That would have added $25 million a year to the state’s coffers.

In addition, the measure – also backed by Sens. Bert Marley of McCammon and Elliot Werk of Boise – would have kept the tax on alcohol, candy and diet supplements as well as food sold through vending machines.

Martinez said the issue is important enough that he intends to bring it back up next year.

“The average guy on the street I talked to thought this was a great idea,” he said. “There’s a value to bringing stuff even when you know it’s going to be defeated.”