Grocery tax credit hike may be held

BOISE – Idaho Gov. Butch Otter would consider delaying a 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 hit public schools.

“There’s cost vs. value there,” Otter said in an interview with the Twin Falls Times-News editorial board; 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, “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.

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 no matter which category they’re in.

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 were willing to forgo the increase.

Next year may be a different story.

“My sense is that everything is on the table at this point, as it should be,” said state 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.”

State Rep. George Eskridge, R-Dover, said there have been “a lot of objections” to the sales tax on food, but 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. The 2008 law, in addition to increasing the credit, closed an embarrassing loophole in Idaho’s law that did not grant the grocery credit to people who made less than the threshold for filing income tax returns. 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.