BOISE – Gov. Butch Otter’s plan to use Idaho’s grocery tax credit as a way to help the state’s truly needy is running into some flak in the state Legislature.
“I don’t agree with that – I just think it should apply to everyone,” said Rep. Frank Henderson, R-Post Falls. “I think we’re smart enough to devise a system that will be equitable for everyone.”
Senate President Pro-Tem Bob Geddes, R-Soda Springs, said, “I have heard some concern that the governor’s program would essentially be a tax increase for some people,” including the middle class and the wealthy.
Idaho currently offers a flat $20-per-person income tax credit to offset a small part of what people pay in sales taxes on groceries, or $35 for those who are age 65 or older. But studies show the typical Idahoan pays closer to $90 a year in sales tax on food, now that the state’s sales tax has been raised to 6 percent. Lawmakers raised it from 5 percent in August as part of a property tax relief plan.
Idaho is one of just nine states that fully taxes food. It’s one of five that offers a credit to partially offset that.
Geddes said when he recently attended a national conference of state senate leaders, he sat with colleagues from Kentucky, Utah and Kansas, all of which have either lowered their sales tax rates on food or are considering doing so. When he told them about Idaho’s tax-credit approach, “each and every one of them said, ‘Oh, I wish we’d done that. That’s simpler and much easier to administer,’ ” Geddes said.
Charging different sales tax rates on different products is difficult for merchants and confusing to consumers, Geddes said. “I think the tax credit is the best way to go.”
He said he’s been hearing support for going with the governor’s approach but perhaps expanding the income categories so more middle-income families would keep the credit they receive now.
“I’m pretty middle class, and right now I get a tax credit for groceries,” Geddes said. “Anything that doesn’t at least preserve that level of tax credit would be an increase to me and my family.”
Otter’s plan calls for the lowest-income families to get a $90 per person annual grocery tax credit, but the amount would drop as incomes rise. Those making more than 240 percent of the poverty level – about $53,000 a year for a family of four – wouldn’t get the credit at all anymore. Otter’s plan also would deny the credit to anyone who receives food stamps and expand it to include those whose income is so low that they aren’t required to file state income tax returns. The extra $15 a year for seniors would continue.
Henderson said a group of House members is working on a broader grocery tax credit proposal without a link to income, and he’d like to co-sponsor that bill when it’s worked out.
Otter’s proposal to tie the credit to income appeals to Roger Sherman, program director for United Vision for Idaho, a group that advocates for tax fairness and social justice issues. “It actually means a substantial amount of money in people’s pockets who need the money,” Sherman said. “In general we feel like it’s not immoral or wrong to tax food, so much as it is to take food out of people’s mouths – which is what you do when you take away 6 percent of people’s buying power who don’t really have enough money to make ends meet.”
However, House and Senate Democrats have come out in favor of completely removing the sales tax from groceries. Thirty states, including Washington, take that approach.
Geddes said that would cost the state budget more than $180 million a year, and the state couldn’t afford to do that all in one chunk.
Otter’s proposal would cost the state an additional $22 million a year. Geddes said he’s been hearing about a broader plan that might cost more than double that much. “The question right now is how much do we bite off this year,” he said.
Any decision will have to accommodate what lawmakers decide to spend in the state budget, he noted. Lawmakers have been speaking out for some spending priorities beyond what Otter laid out in his proposed budget, from funding for substance abuse treatment programs to initiatives outlined by new state Superintendent of Schools Tom Luna in the public school budget.
“All of these have to be factored into the bottom line to make the budget balance,” Geddes said, adding “I still think the grocery tax reduction is a very significant priority for this Legislature, so something is going to happen.”
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