October 19, 2009 in Idaho

Idaho may put off increase in grocery credit

By The Spokesman-Review
 
Grocery tax credit
Currently, Idaho residents who are low-income qualify for a $60 annual credit on their state income tax return to offset sales taxes on groceries; everyone else qualifies for a $40 credit; and seniors get an extra $20. Next year, the credit is scheduled to rise to $70 and $50, unless the governor and lawmakers delay the $15.5 million increase.

Video of governor’s comments
Gov. Butch Otter’s interview with the editorial board of the Twin Falls Times-News.

BOISE – Idaho Gov. Butch Otter has opened the door to delaying the next scheduled increase in the state’s grocery tax credit, possibly saving the state from another $15 million-plus in budget cuts next year that could otherwise hit public schools.

“There’s cost vs. value there,” Otter said in an interview with the editorial board of the Twin Falls Times-News; the governor’s office posted a link to video of his comments on the state’s Web site. “I think we would suffer if we can’t do all that’s possible to do for K-12.”

Otter emphasized that he’s “not going to get out in front of the Legislature” on the issue, but made it clear he’d consider a delay - something he starkly foreclosed this year, even faced with widespread budget cuts.

Jon Hanian, Otter’s press secretary, said, “What he said there I think speaks for itself.” He added, “He’ll weigh anything that is brought to him, in terms of trying to figure out how we get through this difficult period.”

Idaho’s grocery tax credit partly offsets the 6 percent sales tax it charges on groceries, a tax that became especially controversial after lawmakers raised it from 5 percent in 2006, but couldn’t reach agreement on how to grant relief for food purchases.

After two years of legislative wrangling and a veto fight, in 2008 Idaho passed a new law to increase the state’s $20-per-person credit on state income tax returns, to give a much bigger boost in the credit to the low-income, and to keep boosting everyone’s credit by $10 a year until it eventually hits $100, enough to offset what most pay in sales taxes on groceries.

As a result, the credit is now $60 for low-income residents, $40 for everyone else, and seniors get an additional $20.

The legislation, however, allows the annual $10 hikes to be delayed if the state’s economic conditions slide; this year, though Idaho met that condition, neither the governor nor lawmakers was willing to forego the increase.

Next year may be a different story.

“I think my sense is that everything is on the table at this point, as it should be,” said Sen. Shawn Keough, R-Sandpoint, vice-chairwoman of the Legislature’s joint budget committee. “There are an incredible number of people in Idaho out of work, and that’s why we’re where we are today.”

Said Rep. George Eskridge, R-Dover, “This is a pretty extreme economic situation we’re in.” He noted, “We have a lot of objections to a sales tax on food, given that it’s a necessity and something everybody needs.”

But Eskridge said it makes more sense to delay a $10 increase in the credit than to cut something people already are receiving, like funding for an education or Health and Welfare program. “It’s not going to be an easy session, and we’re going to have to utilize every idea we can to minimize the impact that we’re going to have to go through,” he said. “So everybody’s going to have to share the pain a little bit, I think.”

The 2008 law, in addition to increasing the credit, closed an embarrassing loophole in Idaho’s law that had previously excluded anyone who made too little to be required to file an income tax return from receiving the grocery credit at all. Now, anyone, no matter how low their income, can get the credit; as a result, in 2008, at least 57,000 additional returns came in for the credit, and their filers received $5.3 million in grocery tax credits.

Dan John, tax policy manager for the state Tax Commission, said those figures are preliminary; the state is still processing the last of the 2008 tax returns now. If those figures hold, they’ll be slightly less than was anticipated, he said.

The law excludes people who received food stamps, in any amount, from receiving the credit; they can get a pro-rated credit for the months in which they didn’t receive food stamps.

The new law also offered Idahoans the option of donating their grocery tax credit to a state fund that helps low-income Idahoans with energy costs. According to preliminary figures, that resulted in $184,000 in donations in 2008.

To qualify for the higher credit for the low-income, a family can’t have more than $1,000 in taxable income, after all deductions and credits. In 2008, that meant a family of four had to make $25,900 or less.


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