1. Trends & External Forces

Five States Reduce Grocery Taxes To Lessen Impact of Inflation

From the Washington Times:

“A growing number of states have cut grocery taxes to relieve working Americans struggling with runaway inflation.

“Five of the 13 states that taxed groceries last year — Kansas, Idaho, Illinois, Tennessee and Virginia — have since passed laws reducing their cut from supermarket transactions. That cut ranges from 4% to 7%, depending on the state.”

FMI-The Food Industry Association argues to the Times that “taxing food as prices rise creates unfair burdens for Americans who spend larger shares of their income on groceries.”

“Grocery taxes are fundamentally bad public policy because they disproportionately impact lower-income families,” Andy Harig, an FMI vice president, says.  “More than three-quarters of states have now refused to tax groceries, and we are hopeful additional states will follow suit to provide families with much-needed relief.”

The Times writes that “as costs for food soar higher and faster than other items, lawmakers have increasingly clashed over repealing grocery taxes to relieve inflationary pain.

“Virginia Gov. Glenn Youngkin, a Republican, signed a bill last year to abolish the 2.5% grocery tax, fulfilling a campaign promise. This month, state Senate Democrats killed a GOP effort to repeal the local part of the tax, arguing that some towns may need the revenue.”

In addition, “Last year in Kansas, Democrats led a bipartisan push to eliminate their state’s 6.5% sales tax but had to compromise with Republicans who wanted to phase it out more gradually. They ended up cutting the sales tax on food to 4%.”

But a debate remains about whether the cutting of grocery taxes is enough to keep inflation at bay, and “efforts to cut grocery taxes have stalled … in the other eight states that have them — Alabama, Arkansas, Hawaii, Mississippi, Missouri, Oklahoma, South Dakota and Utah.”

KC’s View:

It is an interesting debate that seems to not entirely be strictly along partisan lines … made even more interesting by the fact that a cadre of Congressional Republicans is forcing a House vote on a national consumption tax (which could be as high as 30 percent) that would replace national personal and corporate income taxes (and also would abolish the Internal Revenue Service).

This bill doesn’t seem to have nearly enough support to even get through a narrowly divided House of Representatives – where not even all the Republicans support it – much less get through the Senate and be signed into law by the White House.  But it all certainly suggests to me that the issue of consumption taxes is likely to re-emerge on a regular basis, with the oxygen it gets dependent on how large that House cadre gets.

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