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Idaho grocery tax credit excludes poor

By Betsy Z. Russell
Staff writer
January 9, 2008

BOISE – As Idaho legislators spar with Gov. Butch Otter over whether grocery tax relief should be targeted to the needy or granted across the board, few realize that poor people actually are excluded from receiving Idaho’s current grocery tax credit.

Under current Idaho law, anyone who makes less than $17,500 a year for a married couple, or $8,750 for a single person, doesn’t qualify for the credit, which is designed to partially offset Idaho’s sales tax on food. “They don’t get it at all,” said Dan John, tax policy manager for the state Tax Commission. “It hasn’t changed for years.”

The only exceptions are for the elderly, the blind or disabled veterans.

Last year, both Otter’s bill to increase the credit for the needy and legislators’ alternative plan to increase the credit across the board – which Otter vetoed – changed that provision, opening up the credit for the first time to those too poor to meet income tax filing requirements. Either bill would have ended Idaho’s current distinction as the only state with a grocery tax credit that excludes the poor. But neither bill passed.

Sen. Joyce Broadsword, R-Sagle, vice chairwoman of the Senate Health and Welfare Committee, said she didn’t realize the poor were being excluded. “We need to make sure that we address it this year. We can’t keep fighting about the best way to do it. … It’s definitely something that needs to be addressed.”

Sen. Jim Hammond, R-Post Falls, said he assumed low-income people could apply for the credit, which now stands at $20 per person or $35 for those 65 or older. “It’s something we need to fix, that’s for sure,” he said.

Said Rep. Frank Henderson, R-Post Falls, “It’s embarrassing – it’s unfortunate.”

He said, “I had hoped that between the sessions, negotiations between the governor and those who proposed another system of relief would have resulted in a compromise.”

But instead, Otter in his State of the State message to lawmakers Monday repeated the same proposal he made last year, to raise the credit from $20 to as much as $90 for the poorest Idahoans but reduce or end it for those with higher incomes.

Legislative Democrats on Tuesday called instead for phasing out the sales tax on groceries in Idaho over the next six years. “We think it’s an unfair tax,” said House Assistant Minority Leader George Sayler, D-Coeur d’Alene.

Thirty states, including Washington, exempt groceries from their sales tax. Eight set lower sales tax rates for groceries, and five, including Idaho, offer credits to partially offset the tax. But Idaho’s credit is the only one that excludes low-income people from eligibility.

Said Broadsword, “I don’t know what they were thinking when it was originally passed.”

The Idaho Hunger Relief Task Force, a statewide coalition of public and private charities, social welfare groups and faith groups, is trying to raise awareness of what it calls a “crucial flaw” in Idaho’s current grocery tax credit. “Idaho’s current grocery tax credit is unique in excluding poor families,” said Kathy Gardner, interim coordinator of the group.

The group also wants the credit made available to Idahoans on food stamps, because studies show food stamps cover only a portion of their food needs – so they’re still paying sales tax on groceries.

Kathy Reed, social service director at St. Vincent de Paul in Coeur d’Alene, said she didn’t realize poor people were excluded from the credit until she joined the hunger task force. “A lot of low-income people just don’t even think they’re entitled,” she said. “This affects our target population – those are the people that need the financial help. It’s kind of almost a no-brainer.”

Reed, whose organization provides shelters, food, assistance with rent and utilities, job counseling and other services to poor people in North Idaho, said when she’s helping a poor family catalog its budget to apply for heating assistance, “I’ll ask what do you spend on food a month. It’s always, ‘Whatever’s left over.’ That’s at the bottom of the list,” she said. “There are people going hungry, and it’s the working poor that are coming up short at the end of the month.”

Idaho is one of just seven states that fully applies its sales tax to groceries; the state raised its sales tax from 5 percent to 6 percent in August 2006. Two states – Alabama and Mississippi – fully tax groceries without providing any offsetting credit.

Betsy Z. Russell can be reached toll-free at (866) 336-2854 or bzrussell@gmail.com.

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