Groceries will remain subject to sales tax in Idaho thanks to Gov. Butch Otter’s power of veto.
House Bill 67a, which sought to exempt food sold for human consumption from Idaho sales and use tax, was overwhelmingly approved by the Idaho Legislature late last month. The measure had widespread support from lawmakers, even though it would have greatly reduced state and local sales tax revenue. What it lacked was support from the governor.
Gov. Otter was clear about his opposition to the bill from the outset. In a March 16 letter to legislative leaders, he wrote that repealing the grocery tax would reduce the General Fund by close to $194 million and local revenue-sharing funds by $25 million. This would, he said, “make it more difficult to meet our commitments to improving Idaho’s education system.” The tax on groceries provides a steady stream of revenue because everyone needs to eat: “People buy groceries in good times and bad.”
Yet the governor understands the impetus for the measure. In his veto message, he called the desire to provide tax relief for the working poor “a worthy ambition.” But he added that it is one “already accomplished through the grocery tax credit.” Taxpayers can claim a grocery tax credit of approximately $100 per eligible person on their state income tax returns.
Taxing groceries bucks national trend
Nationwide, more states exempt groceries than tax them, and several of the states that tax them provide a reduced rate or offset the tax with a credit, as does Idaho. The governor of Tennessee is seeking to reduce the tax on groceries even further, from the current 5 percent to 4.5 percent. Only Alabama, Mississippi, and South Dakota tax groceries at the full rate, with no form of relief.
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