Adam’s Blog

That’s my thing, keepin’ the faith, baby. –Joe Friday

The Grocery Tax Olympics

Posted by Adam Graham on January 31, 2007

There are 4 different measures before the Idaho State House Revenue and Taxation Committee. All promise relief to the people of Idaho, but not all plans are created equal. Which is the best. Here’s one blogger’s opinion.

Honorable Mention, Thanks for Playing:

The Otter Plan

The Governor would change the simplest portion of the Idaho tax code ($20 per person tax credit) to a complicated mess with a credit that could range from $0 to $90 and would in effect be a tax increase on certain taxpayers. Come on, what is it with Repulicans governors not being able to get a tax cut done without raising taxes?

Bronze Medal:

The Bayer Plan

Rep. Cliff Bayer (R-Boise) has proposed increasing the Grocery Tax Credit from $20 to $50. That’s nice, but it’s no solution. It’s just a bandaid. The credit will be worth about half what it was when it was introduced in the ’60s and adding more to the credit (particularly without an indexing plan) doesn’t do much for the long-term and $50 is tax on about $833 worth of groceries, so it really doesn’t make up for the tax.

Silver Medal:

The Jacquet Plan

House Minority Leader Wendy Jacquet (D-Ketchum) proposes to cut the sales tax on food to 3%. This is an old proposal from Democrats, but would put money in people’s pockets now with a $90 million tax cut. However, I’d rather be rid of the tax than keep it around in any form.

Gold Medalist:

Rep. Phil Hart (R-Athol) and Rep. Jim Clark (R-Hayden Lake) have the best plan. It would ease Idaho out of the business of charging grocery tax on food. Spreading it out over 4 years lessens the fiscal impact and gives government time to adjust to the new order.

It looks like a winner to me. Clayton Cramer sees all 4 ideas as complex and worries about the difficulty of having 2 seperate rates for any period of time. I think this issue can be addressed. 5 other states tax food differently, so either for 4 years (or forever in the case of the Jacquet proposal.)

Clayton Cramer adds two alternative proposals that are simpler:

Go ahead: bite the bullet. Abolish the sales tax on groceries. If the full cost is too high (and from reading these estimates, it sounds like the full cost would be $180 million), then delay the repeal until one more year has passed, and put that $180 million they collect in 2007 aside to cover tax revenues losses in 2008. Sure, that well will be dry in 2009, but the phase-out proposed by Hart and Clark clearly plan on the grocery sales tax well being dry four years from now.

Alternatively, raise the current state excise tax on cigarettes ($0.57 per pack) to cover the grocery sales tax loss. If the choice is discouraging cigarette use by raising that tax (which is already a separate computation from sales tax) or discouraging poor families from feeding their kids with a sales tax, I know which makes more sense.

I don’t think the tax revenue demands are necessarily too high, but the demands of state spending are. The difference between Cramer’s proposal and that of Hart-Clark is that the state would adjust slowly in terms of revenue spent from the Grocery Sales tax. Small adjustments can be made for the state to prepare for this revenue being cutoff. Actually, if I’m understanding the Cramer Plan 1 correctly, we’d take in and not spend $180 million this year and then release it to make up for lost revenue which we already lost this year because we didn’t spend it. Splitting it up into $90 million chunks might make more sense, spend $90 in ’06 and $90 in ’07, but still would be cutting quite a bit over 2 years.

While I understand how he feels regarding the Cigarette Tax, reality becomes an important player here. Poor people are far more likely to smoke. It may be part of the cause of their poverty, but the government shouldn’t take advantage of their addiction. It’s a move that will end up hurting as much as it helps.

That’s what I think anyway, but you need to let your representative know what you think, because this issue will impact our entire state.

Contact your legislators in Boise by calling 208/332-1000 or for those of you in the rest of Idaho call 1-800/626-0471

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