Thirteen states and many localities continue to tax the sale of groceries, even though the taxes disproportionately hurt the poor and may affect the quality, variety and even the amount of food they can afford to put on the table.
The reason: The taxes provide a steady source of revenue in volatile times, making it difficult for states to get rid of them without finding a way to make up the revenue. Recent efforts in several of the states to eliminate or lower the taxes have failed.
“States might be looking at getting rid of sales tax on groceries, but groceries are between a sixth and a seventh of all consumption,” said Scott Drenkard, analyst at the Tax Foundation, a nonpartisan tax study group. “If you want to raise the same amount of money you might have to increase the [general] sales tax by a full percentage point.”
Alabama, Hawaii, Idaho, Kansas, Mississippi, Oklahoma and South Dakota tax groceries at the same rate as the sales tax on all purchases, according to the Tax Foundation. Arkansas, Illinois, Missouri, Tennessee, Virginia and Utah tax food at a lower rate. Seven fewer states tax groceries than in 1998, when researchers at the Center for Budget and Policy Priorities found that 20 did. But the trend to eliminate the tax has stalled.
It’s not just states that rely on grocery tax revenue. A new study, “Do Grocery Food Sales Taxes Cause Food Insecurity?” by four researchers led by Norbert Wilson of Auburn University, finds that because counties and localities sometimes collect food taxes even if their states don’t, people living in more than a third of the nation’s roughly 3,000 counties are taxed at some level on the food they buy at the store.
The average tax rate is 4.3 percent, which translates to more than $200 for a family with an annual grocery bill of $5,000, the authors wrote. But in some places, like Tuscaloosa County, Alabama, combined state and local taxes can be as high as 9 percent.
The taxes disproportionately hurt low-income Americans, the authors wrote, and contribute to “food insecurity,” which the U.S. Department of Agriculture defines as “reduced quality, variety, or desirability of diet” or “disrupted eating patterns and reduced food intake.”
“The correlation that we are able to report says that in the presence of the tax we see a higher rate of food insecurity,” Wilson said.
Although families spend less on groceries than those with higher incomes, what they do spend accounts for a bigger share of their income. The lowest-income Americans spent an average of $3,667 on food in 2014, which amounted to 34.1 percent of their income, according to the U.S. Department of Agriculture. Middle-income families, in contrast, spent an average of $5,992 on food, or 13.4 percent of income.
People whose income is below poverty lines and who receive food stamps don’t pay the tax because the stamps are nontaxable.
