Risch wants to phase out grocery tax

Gov. Jim Risch on Monday unveiled a six-year plan to phase out the sales tax on groceries – even though Gov.-elect Butch Otter favors a different plan.

“Gov. Otter will also weigh in on the issue, and whether it is this or another plan, the people of Idaho want and deserve tax relief when they buy their groceries,” Risch said at a meeting of legislators in Post Falls.

Otter, a Republican who will take over as governor in January, said last week that he favors a modified, income-based and much-expanded grocery tax credit on Idaho income tax returns, rather than removing the tax entirely.

“There, No. 1, you hit residents, and No. 2, more importantly, you hit the people that really need it,” Otter said.

Idaho’s current grocery tax credit is $20 per person per year, or $35 for those 65 or older. People who are over 62, blind, or disabled veterans can file for the credit even if they aren’t required to file income tax returns, but others can’t.

The credit wasn’t increased in August when lawmakers, at Risch’s urging, raised the sales tax to 6 percent from 5 percent.

Risch said the average Idahoan pays $100 a year in sales tax on groceries, which means the current tax credit offsets only a small portion of the tax paid.

“My preference has been, and is, for a full and immediate repeal of the sales tax on food,” Risch said. However, he said, according to the latest figures that would cost $181 million in lost revenue annually, and that, of course, is not possible.”

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.

Otter said, “Don’t forget – when you give it up, you give it up for everybody.”

Risch said his proposal would reduce the sales tax on food by a penny each year, while also reducing the existing grocery tax exemption. By the sixth year, both would disappear. That, he said, would cost the state about $30 million a year, which he called “reasonable and doable.”

He also noted that the same $30 million amount could be used to double the existing grocery tax credit.

Rep. George Eskridge, R-Dover, said after Risch announced his plan that he still favors increasing the grocery tax credit instead of eliminating the grocery tax completely. He said his constituents embrace the idea once they understand that out-of-state visitors will still pay the tax but Idahoans will be paid back at the end of the year.

“I still prefer the credit,” he said.

Rep. George Sayler, D-Coeur d’Alene, said he likes the idea of axing the grocery tax but that many other factors come into play, such as the fact that doing so would give out-of-state residents a tax break.

“I think it’s a little premature to say I’m all for this or I’m all for that,” he said. “I want to think about the possibilities.”

House Minority Leader Wendy Jaquet, D-Ketchum, also said it’s too soon to decide on a grocery tax plan.

“I’m looking forward to working with a new governor and what other proposals he has to put forward,” she said. “It’s really in the new governor’s job description.”

Removing the sales tax from food is a cause long pushed by Democrats in the Legislature and by some Democratic candidates in recent elections.

According to the state Tax Commission, cutting the sales tax from groceries entirely would remove about 15 percent of the state’s $1.3 billion annual sales tax revenues, but that would be offset by repealing the existing grocery tax credit, which costs about $25 million annually. Other adjustments would be needed to keep unchanged the amount of sales tax proceeds the state sends to local governments through revenue sharing.

Idaho is one of nine states that fully taxes groceries, while six other states tax groceries at a reduced rate. Thirty states and the District of Columbia exempt groceries from the sales tax entirely, including Washington. Idaho is one of five states that offer a grocery tax credit.

Risch also touched on highway improvement plans, anti-drug efforts, expansions to nursing education programs and more in his address to lawmakers attending a three-day tour sponsored by the North Idaho Chamber of Commerce, and urged the legislators to address those proposals in their session that starts in January. However, he said, “I fully realize these matters will be in your hands and the hands of our new governor.”

Otter addressed lawmakers on the tour Sunday night, pledging to work with them regardless of party. After his talk, he flew to Washington, D.C., for the lame-duck session of Congress that will be the last of his three terms there.