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Impact Of Eliminating Grocery Taxes— Here’s What You Should Know!

Grocery Taxes
Grocery Taxes

In the U.S., at least 5 of the 13 states where groceries are taxed have passed laws to decrease or eliminate the taxes. In this article, read and find out how eliminating grocery taxes can impact a state.

Taxes on Groceries

Taxes on Groceries

Grocery taxes are already a part of the revenue system. However, grocery taxes are regressive because people with low income pay a larger share for food than people who earn an average to high income. To date, officials of several states are considering whether regressive taxes must be dissolved. Unfortunately, regressive taxes could be a stable source of income amidst a recession. On January 1, however, at least 5 of the 13 states where groceries are taxed have passed laws to decrease or eliminate the taxes. These states are Idaho, Illinois, Kansas, Tennessee, and Virginia.

According to Mercer, the state of Tennessee has decreased its grocery taxes to 4% from 5% in 2017. It has also removed the taxes for a month in August 2022. Illinois has also removed its grocery taxes for a year since July 2022 and Idaho increased tax credits for grocery purchases. Members of the Supplemental Nutrition Assistance Program (SNAP) are generally excluded from grocery taxes. However, in some places, grocery taxes are already included in the shelf price of some items.

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Disadvantages of Eliminating Grocery Taxes

Cornell University Professor of Applied Economics and Management Harry Kaiser argued that replacing the grocery taxes is not that easy. For instance, in Virginia, a new law removed 1.5% grocery taxes on essential items like diapers and feminine hygiene products. However, eliminating the grocery taxes is predicted to cost $399 million. In 2028, it is predicted to increase even more to $415 million. Eliminating the grocery taxes will be expensive for several states. In general, grocery tax revenues contribute to healthcare, public education, and transportation. If a state fails to compensate for the lost revenue, the mentioned public services could be put at risk, as reported by Mercer.

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