Today’s Discussion: When The State Takes Your Grocery Money

Originally posted 5/1/07. Yeah, regressive taxation is pretty immoral.

Let’s take a moment out of the afternoon to consider a pressing issue to almost none of you: grocery taxes. They’re in the news right now because one (Arkansas) of the three states (Arkansas, Alabama, Mississippi) that levy their full state sales tax on groceries just passed legislation which effectively halves their grocery tax. Why aren’t the other two doing that? Well, they’re poor states without a lot of tax revenue, and they’re loathe to cut off a guaranteed stream - after all, people need to eat, so they will always buy groceries. But it is precisely that people need to eat that makes grocery taxes so problematic.

Are you familiar, dear reader, with the concept of regressive taxing? Basically, a regressive tax is one that costs more for poor people to pay than for rich people. Hey, wait a sec - isn’t everyone in the state paying the same sales tax rate on their groceries? Sure, but poor people pay a much higher percentage of their income on groceries than rich people do, and it’s not like they can alter their behavior all that much to reduce the burden. So, grocery taxes act as a hidden flat state income tax, which is, by definition, regressive (a true flat tax would apply the same level of burden to all taxpayers and is actually quite difficult to achieve, when one considers assets, interest, dividends and so forth).

All this is especially troubling in Mississippi and Alabama, two states with citizenry who can ill afford extra taxes on necessities. The national picture is also quite telling: of the 45 states with sales taxes, 30 have waived all grocery taxes. Seven (soon to be eight) states use a lower sales tax for groceries than other items, and five states offer rebates and credits to lower-income residents, leaving the two Deep South states shamefully alone in their policies (the policies are shameful, not that they are the only states which retain them). As it turns out, of the 15 states that levy grocery taxes, only one is a “blue” state: Illinois.

Yes, the 1% grocery tax in Illinois is nominal, but a bad regressive tax is a bad regressive tax. Isn’t the 10.25% tax we pay to eat out in Chicago enough? Just something to think about during this, the week of the food stamp challenge.

Ala., Miss. criticized for taxes on food [Clarion Ledger]

Regressive Tax [Wikipedia]

Sales & Use Taxes [Illinois Revenue]

A Governor Truly Tightens His Belt [NYTimes]

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Today’s Discussion: When The State Takes Your Grocery Money